# Petition for Writ of Certiorari — Continentalenental Carbon Co. v. Action Marine Marine, Inc. (No. 07-257) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386009_1376%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 2007 ## Text 07-257 AUG 24 2007 | No. 07- OFFICE OF THE CLERK In the Supreme Court of the Anited States CONTINENTAL CARBON CO. AND CHINA SYNTHETIC RUBBER CoRP.., Petitioners, Vv. ACTION MARINE, INC. ET AL.. Respondents. On Petition for a Writ of Certiorari to the United States Court of Appeals for the Eleventh Circuit PETITION FOR A WRIT OF CERTIORARI H. THOMAS WELLS, JR. EVAN M. TAGER PETER S. FRUIN Counsel of Record Maynard, Cooper & Gale NiCKOLAIG. LEVIN 1901 Sixth Ave. Nori Mayer, Rrown. Rowe & 2400 AmSouth/Harbert Maw LLP Plaza 1909 K St... NW Birmingham, AL 35203 Washington, DC 20006 (205) 254-1000 (202) 263-3000 J. BRETT BUSBY Mayer, Brown, Rowe & Maw LLP bg 700 Louisiana St.. Suite 3400 Houston, TX 77002 (713) 238-2606 Counsel for Petitioners WILSON-EPES PRINTING CO . INC. — (202) 789-0096 - WASHINGTON D C. 20002 i QUESTIONS PRESENTED This petition challenges a $17.5 million award of punitive damages for petitioners’ failure to do more to prevent peri- odic releases of carbon black during the manufacturing proc- ess. There are no claims of physical injury, only property damage. And the compensatory damages of $1,915,000 are substantial by any definition: Among other things, they in- clude the costs of remediating properties that tested negative for carbon black, rermbursement for a company’s ordinary business debts (such as a mortgage and a truck loan), and compensation for the emotional distress allegedly suffered by the owner of the company. The general question presented is whether the $17.5 mil- lion punitive award is unconstitutionally excessive under BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996), and State Farm Mutual Automobile Insurance Co. v. Camp- bell, 538 U.S. 408 (2003). More specifically, this case raises qucstions about the application of the three BMW guideposts, each of which has divided the lower courts: 1. Whether courts applying the reprehensibility guide- post should consider how the defendant’s conduct compares to. conduct in other punitive damages cases in determining whether the amount of punitive damages is out of proportion to the gravity of the offense. 2. Whether, aid if so in what circumstances, a puni- tive/compensatory ratio in excess of 1:1 is allowable when the amount of compensatory damages is “substantial” and other forms of punishment and deterrence, including signifi- cant attorneys’ fees for “bad faith” and extensive injunctive relief, have already been imposed. 3. Whether, in applying the comparable penalties guide- post, a reviewing court may disregard the most realistic legis- lative penalty and instead speculate about the remote possi- bility of a severe, yet unprecedented and extremely unlikely, fine. RULE 29.6 STATEMENT Petitioner Continental Carbon Co. is wholly owned by CCC USA Corporation, which is two-thirds owned by Peti- tioner China Synthetic Rubber Corporation and one-third owned by Taiwan Cement Corporation. Both China Syn- thetic Rubber Corporation and Taiwan Cement Corporation are publicly traded in Taiwan. No publicly owned company owns more than 10% of China Synthetic Rubber Corpora- tion’s or Taiwan Cement Corporation’s stock. TABLE OF CONTENTS Page ee ee Br I BED cscs cssacsensacicevasvecersacsvoonetiscipnioiens i Re ei IES osc cincconoevicsencincsecstonssanneverevenpstneinesl ii DS FE ERE BI oes es cnceseovonvnsoscnecvesecesnsencceegnenieds Vv a ia ccs vnscnrennereanedabivnenentiniesactouiel l I iiss cnsiseibiconsietlontienderiess palwaberswiteerorseianvers | CONSTITUTIONAL, STATUTORY, AND 7 REGULATORY PROVISIONS INVOLVED...................04. l SE eile Aikncnilectid a Aketebinctbisttendaitiiadrivcnetien veseesoceorsn l REASONS FOR GRANTING THE PETITION ................... 8 I. THE LOWER COURTS ARE SPLIT AND NEED GUIDANCE ON THE PROPER APPLICATION OF THE BMW GUIDEPOSTG. ............ 9 A. There Is A Conflict Regarding Whether Reviewing Courts Should Consider The Full Spectrum Of Punishable Conduct When Applying The Reprehensibility Guidepost................. 9 B. There Is A Conflict Regarding The Maximum Permissible Ratio When Compensatory Damages Are “SuOstantial.” .........cccecsecsesscecsesccsvevenes 14 C. There Is A Conflict Regarding The Propriety Of Speculating About Severe, But Highly Unlikely, Legislative Fines When Applying The Comparable Penaltics Guidepost. ..................... 18 Il. THE ELEVENTH CIRCUIT’S DECISION IS REPRESENTATIVE OF A PERVASIVE FAILURE AMONG THE LOWER COURTS TO HEED THE CONCERNS UNDERLYING THIS COURT'S PUNITIVE DAMAGES CASES. ................23 iV TABLE OF CONTENTS—continued Page Il. THIS COURT SHOULD GRANT PLENARY REVIEW IN BOTH THIS CASE AND EXXON VALDEZ OR, ALTERNATIVELY, GRANT REVIEW IN ONE AND HOLD THE OTHER............. 29 CFP RIE ionicsectaiedenentosvcbubvndnnisiigassasdcsiasatheiawniiiononiatones 30 Vv TABLE OF AUTHORITIES Page(s) a CASES: Advocat, Inc. v. Sauer, Be ee tee te, SOE CATR. 2003) oo. iccccscccccccurvccccssersseses 28 Alaska Dep't of Envtl. Conserv. v. EPA, a I i os ss aceusentvereasepdvddonaiens 3 4 Asa-Brandt, Inc. v. ADM Investor Servs., Inc., 4 Pe Tae Fr Ge DD hac siseoccecccssoncssccsvacccoonscevens’s 11 Bach v. First Union Nat'l Bank, 4 A ee CN Ee I FD vic vntsc cosccoceviccnacndonsedgsveays 9,14 4 Bains LLC v. ARCO Prods. Co., a ME Fe FOIE GAME. COUP) occcccneccscccccvesdcssorccossesoes Hy 4 BMW of N. Am., Inc. v. Gore, ! ; SF Me TR OTIND cscncresovssexnsavseicosecesensencenssnindavess passim 4 Bocci v. Key Pharms., Inc., 76 P.3d 669 (Or. Ct. App.), modified, 79 P.3d 908 vf) kG Sige sees ae Sameera ea 28 4 Boerner v. Brown & Williamson Tobacco Co., 4 FP TI FI CBAC, ZS) ois csccsescccascvecerccovccccccases 12,14 4 Bogie v. McClure, 332 F.3d 1347 (11th Cir. 2003).......... _ ; Cambio Health Solutions, LLC v. Reardon, i % 2007 WL 627834 (6th Cir. Feb. 27, 2007).................2.. 27 Campbell v. State Farm Mut. Auto. Ins. Co., 98 P.3d 409 (Utah 2004) «0... .ceseeeceeeeseees 16, 17, 22, 26 4 Casumpang v. Int'l Longshore & Warehouse Union, ‘ Local 142 F. Supp. 2d 1201 (D. Haw. 2005) ................ 15 ; Ceimo v. Gen. Am. Life Ins. Co.., : 2003 WL 25481095 (D. Ariz. Sept. 17, 2003), 4 aff'd, 137 F. App’x 968 (9th Cir. 2005)... 15 : Chicago Title Ins. Corp. v. Magnuson, BF 0d ee CN iO PWT Biiibntcencicatosonuabscsrsardaisesoseies AO vi TABLE OF AUTHORITIES—continued Page(s) City of Modesto Redevelopment Agency v. Dow Chem. Co., 2006 WL 2346275 oD Be 21 City of Warner Robins v. Holt, S70 S.6.20 250 (es CL App. E99B) .............0.c00secesvrnees 17 Claiborne v. United States, 127 S. Ct. 551 (2006).............. 30 Clark v. Chrysler Corp., 436 F.3d 594 (6th Cir. 2006)...................0. 14, 15, 20, 21 Cooper Indus., Inc. v. Leatherman Tool Group, Inc., I isa sicacks osicorsnniroydcdseietebncbiutanetevvcsmesers 10 zarnik v. Illumina, Inc., 2004 WL 2757571 (Cal. Ct. App. Dec. 3, 2004) .......... 15 Daka, Inc. v. McCrae, 839 A.2d 682 (D.C. 2003).............. 18 Eden Elec., Lid. v. Amana Co., BFS ae Oe CE FOS). 6 oosinsescccconssenvovsesvessavenes ye In re Exxon Valdez, 490 F.3d 1066 (9th Cir. 2007)............... 1S, 22, 26,27, 29 In re Exxon Valdez, 472 F.3d 600 (9th Cir. 2006) .......... 7,29 In re Exxon Valdez, 270 F.3d 1215 (9th Cir. 2001) ............ 24 Goddard v. Farmers Ins. Co., 120 P.3d 1260 (Or. Ct. App. 2005), modified on reconsideration, 126 P.3d 682 (Or. Ct. App. 2006), rev. granted, 143 P.3d 239 (Or. 2006) ............... 1] Greenberg v. Paul Revere Life Ins. Co., 91 F. App’x 539 (9th Cir. Jan. 12, 2004) ................ 19, 28 Honda Motor Co. v. Oberg, 512 U.S. 415 (1994) .............. 8 Inter Med. Supplies, Lid. v. EBI Med. Sys.; Inc., Fe Ce BI ors sO nc neve cn esceecensenisessees 24, 25 James v. Horace Mann Ins. Co., ee ape PE Ais, BOD vac cvssiveciseiceoocecainsensensyenescedies 22 vil TABLE OF AUTHORITIES—continued Page(s) Jet Source Charter, Inc. v. Doherty, 55 Cal. Rptr. 3d 176 (Cal. Ct. App. 2007)... 15 Jim Ray, Inc. v. Williams, _$.W.3d __, 2007 WL 1831790 (Ark. Ct. App. De i 21 Johansen v. Combustion Eng'g, Inc., Se BE I Gay CTF Peieees Sonne cecccoveresersececees Sai Kemp v. AT&T Co., 393 F.3d 1354 (11th Cir. 2004).... 13, 22 Kent v. United of Omaha Life Ins. Co., 430 F. Supp. 2d 946 (D.S.D. 2006), rev'd in part on other grounds, Pe Fe Fe tT irerckrcsvs vecestnsccenensceevecenesseeess 15 Leatherman Tool Group, Inc. v. Cooper Indus., Inc., Ek Fe Ee BE nccanticecentyscovsneicetcovuveteensins 2! Life Ins. Co. v. Johnson, Fe ee ING BONED saiccvesccnscovestotscoscscecsnstonenton 13 Mathias v. Accor Econ. Lodging, Inc., EE de TS CTI es ID ni teisthincevsonseeseessnccosseontiage 19 McCreary Cty. v. ACLU, $43 U.S. 924 (2004)... ee 30 Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996)........0...00..0000 18 Memphis Cmty. Sch. Dist. v. Stachura, ee ee eI foe cote Saratiches ott cadiicovevncienntioeiprions 24 Meredith v. Jefferson Cty. Bd. of Educ., a I I A i ia dent datnisesinp denis en omonermanbous 30 Pac. Mut. Life Ins. Co. v. Haslip, 499 U.S. 1 (1991).... 25, 28 Parents Involved in Cmty. Sch. v. Seattle Sch. Dist. PO Fs EC Bia cisnie as iindnesiirveicosvvsssivevene 30 Park v. Mobil Oil Guam, Inc.., 2004 WL 2595897 (Guam Nov. 16, 2004) 2000000. 21 Vili TABLE OF A®'THORITIES—continued Page(s) Philip Morris USA v. Williams, ee ie I RIED cic vexscctceovsosoveeeseesicvubenseceeses passim Philip Morris USA v. Williams, ee sc, dcnanecescndsovecerdvectendeeovse eda 8 Pichler v. UNITE, 457 F. Supp. 2d 524 (E.D. Pa. 2006) ...............s00008 25, 26 Planned Parenthood of Columbia/Willamette, Inc. v. Am. Coal. of Life Activists, 422 F.3d 949 (9th Cir. 2005), cert. denied, 547 U.S. 1111 (2006).......... 7, Say 52 Rhone-Poulenc Agro §.A. v. DeKalb Genetics Corp., SOS FI TSG6 He. Civ, DOGS} vcscccecssesesecsevcecccssceses 16, 28 Rita v. United States, 127 S. Ct. 551 (2006) ......... eee 30 Roby v. McKesson HBOC, 2006 WL 3775897 (Cal. Ct. App. Dec. 26, 2006), rev. granted, 156 P.3d 1014 (Cal. 2007) ....0.. ee 15 Seltzer v. Morton, 154 P.3d 561 (Mont. 2007).............. 16, 28 Simon v. San Paolo U.S. Holding Co., Fe lac katnitesntavcanirwoersesucvosenssnscavonscaane 1] Be Fe CS aire vccicsccecrccccsecensevescsnenss 24 State Farm Mut. Auto. Ins. Co. v. Campbell, Csi iceebacticeniwecepuedresacetvereddss passim Steel Techs., Inc. v. Congleton, —_§.W.3d _, 2007 WL 1790599 (Ky. June 21, Se os dalnnaigpconcenesinpwe’ ra Stogsdill v. Healthmark Partners, L.L.C., i FN i O initne nies ccsecedececsnvseeseraenkantensds 27 Tellabs, Inc. v. Makor Issues & Rights, Ltd., ec chptnertonensssvenncede 10 Tony Gullo Motors I, L.P. v. Chapa, Re ee EE Pe ES BOE vrcticertecenieccehsksnstsevenvedosenasas 21 ix TABLE OF AUTHORITIES—continued Page(s) Trinity Evangelical Lutheran Church & Sch.- Freistadt v. Tower Ins. Co., GOT TR We ie FO Oe ie SD cocaseccccecevesecsvcvccccsscocccesecees 16 TXO Prod. Corp. v. Alliance Res. Corp., A Fas MR ee sicscusecctvevoscescees 9,10 Union Pac. R.R. v. Barber, BF BW Fe ee CTI, BE isvovesacenecccescosccevecevescoss 16, 19 United States v. Ashland, Inc.., Rie ye | 14 Van Orden v. PEFTV , DAF Wee FER (ZOOS) ooccvcsccescvcdecsesyenees 30 Walker v. Farmers Ins. Exch., 63 Cal. Rptr. 3d 507 (Cal. Ct. App. 2007) .............. 15, 18 Williams v. ConAgra Poultry Co., ROR RR ae es | 15 Willow Inn, Inc. v. Pub. Serv. Mut. Ins. Co., Re en Bee | 19 Zhang v. Am. Gem Seafoods, Inc., BR eT 8 28 CONSTITUTIONAL, STATUTORY, AND REGULA- TORY PROVISIONS: eS, eo ce cunen voveosevees I Oe Fa ee ta ica thd daciers oveuereeescgeceee ak ee tie RR 20 PLA. COE & Fre CEP De Pie i rictkcncvicesevevscsavs seeeesss 1, 6, 7, 20 CRETE ag TR i is MISCELLANEOUS: 1 Dan B. Dobbs, LAW OF REMEDIES (2d ed. 1993) ............. 24 Xx TABLE OF AUTHORITIES—continued Page(s) Clarence Morris, Punitive Damages in Tort Cases, AD Fes ac PE CO Fa 0 BE Pcocrenvecesvcdvcdedeisncescevccoccetios 24 Petition for Certiorari, Exxon Shipping Co. v. Baker, PU, SEE Cis PAI, Be IO OD vncesecevercesesescvcscecveoceves 30 Respondent’s Brief, State Farm Mut. Auto. Ins. v. Campbell, No. 01-1289 (U.S. Oct. 17, 2002), RP in cau dushecbicsubebaiuaminanrtineensiers 17 Robert L. Stern et al., SUPREME COURT PRACTICE (8th ed. 2000) .......... ERR PSE SGP ea Ca aI IS Ee OORT. ed 30 PETITION FOR A WRIT OF CERTIORARI Continental Carbon Co. and China Synthetic Rubber Corp. (collectively “CCC”) respectfully petition for a writ of certiorari to review the judgment of the United States Court of Appeals for the Eleventh Circuit in this case. OPINIONS BELOW The opinion of the court of appeals (App., infra, la-32a) is reported at 481 F.3d 1302. The order of the court of ap- peals denying rehearing (App., infra, 55a) is unreported. The orders of the district court denying petitioners’ post-trial mo- tions (id. at 33a-47a), entering injunctive relief (id. at 48a- 54a), and entering final judgment on the claims submitted to the jury (/d. at 56a) are unreported. JURISDICTION The judgment of the court of appeals was entered on March 21, 2007, and a timely petition for rehearing was de- nied on May 18, 2007. Justice Thomas extended the time for filing a petition for writ of certiorari to August 27, 2007. The jurisdiction of this Court is invoked under 28 U.S.C. § 1254(1). CONSTITUTIONAL, STATUTORY, AND REGULATORY PROVISIONS INVOLVED The Due Process Clause of the Fourteenth Amendment to the United States Constitution provides in relevant part: “No State shall * * * deprive any person of life, liberty, or property, without due process of law.” U.S. Const. amend. XIV, § 1. 0.C.G.A. § 13-6-I1 and ALA. CODE § 22-22A-5(18)(c) are included in the appendix at 57a. STATEMENT Over the past decade and a half, this Court repeatedly has expressed concern about awards of punitive damages that, “today, may be many times the size of such awards in 2 the 18th and 19th centuries.” Philip Morris USA v. Williams, 127 S. Ct. 1057, 1064 (2007). To assist courts in determining when a punitive award is unconstitutionally excessive, the Court has identified three guideposts: (i) the degree of repre- hensibility of the misconduct; (ii) the ratio between the puni- tive and compensatory damages (or potential harm in the un- usual circumstance of a thwarted attempt); and (iii) the dif- ference between the punitive damages and the legislative and/or administrative penalties for comparable misconduct. BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 574-85 (1996). And it has required “[e]xacting appellate review” of the trial court’s analysis of these guideposts to ensure that the amount of punitive damages is “based upon an application of law, rather than a decisionmaker’s caprice.” State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 417-18 (2003) (in- ternal quotation marks and alterations omitted). Regrettably, lower courts often apply the BMW guide- posts mechanically without considering this Court’s broader concerns about the size of punitive awards, such as whether they are “tantamount to a severe criminal penalty” (BMW, 517 U.S. at 585), “extraordinary by historical standards” (id. at 594 (Breyer, J., concurring)), or excessive in relation to a “State’s legitimate interests in punishing unlawful conduct and deterring its repetition” (id. at 568). Moreover, courts routinely misapply the guideposts, weakening their “con- straining power to protect against serious and capricious dep- rivations [of property]” (id. at 590 (Breyer, J., concurring)). This case is emblematic. In affirming a $17.5 million puni- tive award that is over nine times the compensatory damages, while ignoring the punitive and deterrent effect of the com- pensatory damages, attorneys’ fees, and injunctive relief, the Eleventh Circuit applied the BMW guideposts in a manner that deprived them of their “constraining power.” Review is necessary because the Eleventh Circuit's decision is unfaith- ful to the Court’s precedents and conflicts with numerous de- cisions applying those precedents. 3 1. CCC’s operations. CCC owns a plant in Phenix City, Alabama, that manufactures carbon black. R52, 534. Carbon black is a highly engineered product that is manufactured by heating feedstock oil to a high temperature in a low-oxygen reactor. R218-19. The resulting product is smoke that in- cludes both carbon black and waste gases. R84. The carbon black is separated from the gases, processed, and formed into small pellets for ease of handling and shipment. R217, 226. Carbon black has many commercial applications. Its most popular use is in making tires. CCC also sells carbon black for use as pigment in rubber and plastic items, inks, and many other useful products. Dkt. 38, at 3. While the plant originally had one production unit, Unit 1, CCC built a second production unit in 1999, Unit 2, to meet expanding demand for carbon black. R224. During con- struction, CCC worked with the Alabama Department of En- vironmental Management (“ADEM”) to identify and install the best available pollution-control technology.’ R221-22, 347, 563. For example, each unit has several large “bagfilter” compartments, cach of which contains several hundred bags that collect the carbon black after it is produced. R217, 221, 559-60. A thermal oxidizer is designed to incinerate any par- ticulate matter not captured by the bagfilters (including car- bon black) at 1700 degrees Faluenheit. R221, 332, 343. The gas stream that comes out of the thermal oxidizer is vented through a stack. R350. Electronic probes called Triboguards detect any solid particles in the stream and sound an alarm if anything is amiss so that employees can investigate. R223, 345-46, 350. ADEM recognized that this technology, while the best available, was not perfect and issued a permit to CCC to emit Under the Clean Air Act, State agencies- not industry- determine the best available pollution control technology. See Alaska Dep't of Envtl. Conserv. v. EPA, 540 U.S. 461, 468-69 (2004). a ee ae a Fe ai AS, eal as Aa Die aia i nae EO MN hs ERE Rien oa ba igi ae be Pos) ain ey Ney Set Sok as 8 ides SE oy tg ok ee ee “ fs = BY Ge 4 re is Bilis Sn el ge pa are er Lhe atts Fae er a Ba stlhes SB Xr > * ie VM eS SOD Soe < 4 120 tons per year of particulate matter, including carbon black. R327-28, 937-38. Unfortunately, some carbon black emissions did occur: Unit | developed leaks (R167-68, 372, 425, 497, 1335, 1340), while Unit 2 had insufficient bagfilter capacity, causing premature bag failure (R71-75, 367-68). Nevertheless, uncontradicted evidence showed that CCC identified and remedied the causes of er-issions when they occurred (PX17) and repaired and replaced parts of its exist- ing plant (R74-75, 167, 182-83, 385, 572). CCC also built new plant facilities, including two additional bagfilter com- partments for Unit 2 in 2003. R75, 1361. These additional bagfilter compartments “pretty much” solved the Unit 2 problems. R1361. A group of nearby property owners—a boat dealership, Action Marine, Inc.; its owner John Tharpe; the City of Co- lumbus, Georgia; and city resident Owen Ditchfield—-were dissatisfied with these measures. They claimed that carbon black had periodically escaped from CCC’s plant and been carried by the wind onto their properties, causing a black dis- coloration.” And they wanted CCC to do more to remedy the emissions sooner. In particular, they wanted CCC to replace Unit | instead of trying to repair the leaks first. R167-68, 372, 425, 497, 1335, 1340. And they asserted that CCC waited too long to replace the Unit 2 bagfilter system. R71- 75, 367-68. 2. Respondents sue CCC and receive a huge verdict. These property owners—respondents in this Court— eventually brought claims against CCC for negligence, nui- sance, trespass, and wantonness under Georgia law. Respon- ” Action Marine claimed that its boats were discolored and that it was therefore losing customers. R1052-53. The City claimed that carbon black emissions had blackened the roof of the Civic Center and caused black streaking at nearby city facilities. R1010-11, 1224, 1230-32. Owen Ditchfield claimed that the material dirtied the paint on his houses and the finish on his vehicles. R! 188-90. dents sought recovery for their property damage, injunctive relief, punitive damages, and attorneys’ fees for “bad faith” under O.C.G.A. § 13-6-11. They did not claim any physical illness or injury.” CCC contested several elements of the various causes of action as well as the extent of respondents’ damages: Several of the properties for which the City sought recovery tested negative for carbon black. R1447, 1613, 1795-96; R1448, 1794, PX104B-63; R1451-53, 1616, PXIO4A-2, 104B-21, DX162, at 5. Moreover, only tiny amounts of carbon black were present on all of respondents’ other propertics except one of Action Marine’s boats. R1786-89, 1802-03, 1817, 1825, 1863-64; DX162. On these properties, microscopic ex- amination revealed that other dark particles such as mold spores and pollen—not carbon black—were responsible for the discoloration. R1782-83, 1791-92. The jury nevertheless returned a general verdict for re- spondents and awarded them $1,915,000 in compensatory damages: $45,000 to Ditchfield, $100,000 to Tharpe for emo- * Moreover, there was no evidence that the carbon black emissions posed a health risk to the community. Though the Eleventh Circuit disagreed, its position’ was-based on the erroneous belief that CCC’s Material Safety Data Sheets (““MSDSs”") proved that carbon black emissions were possibly carcinogenic to humans. App., in- fra, 24a & n.20. In fact, the MSDSs state that the U.S. National Toxicology Program and the U.S. Occupational Safety and Health Administration have not designated carbon black as a carcinogen. PX32-17. While one agency, [ARC, has concluded that carbon black has possible carcinogenic effects based on rat inhalation studies, and therefore classified carbon black as a class 2-B car- cinogen, even it acknowledged that “‘/iJhere is inadequate evi- dence in humans for the carcinogenicity of carhon black.” Id. (emphasis added). Plaintiffs presented no evidence that either hu- mans or animals could potentially get cancer or suffer other ad- verse health effects from the periodic, atmospheric releases of car- bon black at issuc here. 6 tional distress, $1.2 million to Action Marine for lost busi- ness value, and $570,000 to the City for remediation costs. Dkt. 216. The City’s award included $132,350 for properties that did not test positive for carbon black. PX113, at 19-20; Appellants’ Br. 17 n.2. And Action Marine’s award included lost profits as well as $795,000 for payment of ordinary busi- ness debts, such as a mortgage and a truck loan, that Action Marine claimed it would have paid down with those profits but for the discoloration. Rl 111-16; PX79, Ex. 5. The jury also awarded respondents $17.5 million in punitive damages, as well as $1,294,000 in attorneys’ fees based on a finding of “bad faith.” Dkt. 216; Dkt. 217. 3. The district court enters judgment for respondents. The district court denied CCC’s post-trial motions and en- tered judgment on the verdict. App., infra, 33a-47a. The court recognized that the $17.5 million punitive award was over nine times the compensatory damages and seventy times the maximum civil penalty of $250,000 under Alabama law (the state with regulatory authority over the plant). /d. at 45a- 46a & n.6 (citing Ala. Code § 22-22A-5(18)(c)). But the court held that these disparities were permissible, relying primarily on Johansen v. Combustion Engineering, Inc., 170 F.3d 1320 (11th Cir. 1999), a pre-State Farm case that al- lowed $4.35 million in punitive damages even though that amount “was around 100 times the amount of actual damages awarded by the jury” and “100 times greater than the maxi- mum penalty that could have been imposed.” App., infra, 4Sa-47a & n.6. The district court also ordered extensive injunctive re- lief. App., infra, 48a-54a. CCC had to replace or repair sub- stantial parts of the Unit | bagfilter system; submit to air and video monitoring; and file progress reports subject to court verification. Jd. at 49a-53a. A CCC employee estimated that these measures would cost at least $4.2 million. R475-76. 4. The court of appeals affirms. CCC appealed to the Eleventh Circuit, which affirmed the judgment. App., infra, Fi oe 7 la-32a. As relevant here, the court concluded that CCC’s conduct was “exceedingly reprehensible” and supported $17.5 million in punishment. /d. at 23a-26a. But the court admitted that it reached its reprehensibility conclusion with- out comparing CCC’s conduct to the misconduct in other pu- nitive damages cases, instead basing its holding “on the facts before us in this case alone.” /d. at 25a-26a. The court also held that a 5.5:1 ratio—which it reached by adding the $1,294,000 attorneys’ fees award for “bad faith” to the compensatory damages of $1,915,000 to produce a total denominator of $3.2 million — was acceptable. /d. at 27a-29a. Relying on Ninth Circuit decisions, the court rea- soned that while “ratios in excess of 1:1 and/or 4:1 may only rarcly satisfy due process requirements,” and “a 1:1 ratio [is] the general rule when substantial compensatory damages have been awarded,” this case was “the rare exception” in which a higher ratio was allowed. /d. at 28a-29a & n.24 (cit- ing In re Exxon Valdez, 472 F.3d 600, 624 (9th Cir. 2006); and Planned Parenthood of Columbia/Willamette, Inc. v. Am. Coal. of Life Activists, 422 F.3d 949, 962 (9th Cir. 2005), cert. denied, 547 US. 1111 (2006)). Finally, the court held that Alabama Code § 22-22A- 5(18)(c) provided fair notice of a $17.5 million punishment. App., infra. 29a-32a As the court explained, that provision limited fines to $25,000 “per violation” and up to $250,000 “per order.” /d. at 30a. But nothing in the statute, it noted, expressly precluded ADEM from issuing multiple orders. /d. at 30a-31a. Thus, the court believed that it was reasonable to assume that, “if Alabama citizens have found themselves the victims of [CCC’s] malfeasance,” ADEM would have issued repeated orders, ultimately fining CCC “several million dol- lars.” /d. at 31a. Accordingly, it held that the $17.5 million punitive award satisfied duc process. /d. at 31a-32a. 8 REASONS FOR GRANTING THE PETITION This Court has long cautioned that “punitive damages pose an acute danger of arbitrary deprivation of property.” Honda Motor Co. v. Oberg, 512 U.S. 415, 432 (1994). In BMW, it adopted three guideposts to help courts identify when a “multimillion dollar penalty” is “grossly excessive” and a “lesser” award would adequately advance the State’s interests in punishment and deterrence. 517 U.S. at 584-85. Unfortunately, BMW did not have its intended effect. Hence, the Court was compelled to provide additional guid- ance in State Farm. Although it found State Farm’s conduct “reprehensible,” the Court held that “a more modest punish- ment” than the $145 million awarded by the jury “could have satisfied the State’s legitimate objectives.” 538 U.S. at 419- 20. The Court suggested that, “in light of the substantial compensatory damages,” a “punitive damages award at or near the amount of compensatory damages”—$1 million— was likely the constitutional maximum. /d. at 429. Yet even State Farm did not stem the tide of large puni- tive awards. Thus, in 2006 this Court granted certiorari to re- view a $79.5 million punitive award. See Philip Morris USA v. Williams, 126 S. Ct. 2329 (2006). In Philip Morris, the Court agreed to consider whether: (i) the Due Process Clause prohibits juries in individual cases from punishing defendants for injuries suffered by non-parties; and (ii) the $79.5 million punitive award was unconstitutionally excessive. Philip Mor- ris USA v. Williams, 127 S. Ct. 1057, 1062 (2007). Because the Court ruled for Philip Morris on the first issue, it did not need to reach the excessiveness issue. /d. at 1065. This case offers a perfect opportunity to provide the guidance on the proper application of the BMW guideposts—- and on the excessiveness inquiry more generally—that the lower courts sorely need but that the disposition in Philip Morris forestalled. The Eleventh Circuit's conclusion that a $17.5 million punitive exaction is constitutionally acceptable 9 is irreconcilable with the concerns about arbitrary punish- ments that this Court repeatedly has expressed. Moreover, that court’s strained application of the BMW guideposts di- rectly conflicts with numerous decisions by other federal cir- cuit courts and state courts of last resort. The depth, breadth, and significance of these conflicts strongly support certiorari. I. THE LOWER COURTS ARE SPLIT AND NEED GUIDANCE ON THE PROPER APPLICATION OF THE BMW GUIDEPOSTS. The Eleventh Circuit’s application of each BMW guide- post conflicts with numerous federal circuit court and state supreme court decisions. Review is necessary and appropri- ate because these issues that have divided the lower courts arise with regularity in punitive damages litigation. A. There Is A Conflict Regarding Whether Review- ing Courts Should Consider The Full Spectrum Of Punishable Conduct When Applying The Reprehensibility Guidepost. The first guidepost—the degree of reprehensibility— is “(t]he most important indicium of the reasonableness of a punitive damages award.” State Farm, 538 U.S. at 419 (in- ternal quotation marks omitted). Here, the Eleventh Circuit concluded that CCC’s conduct was “exceedingly reprehensi- ble.”’ App., infra, 23a-26a. In so holding, the court expressly “declined [CCC’s] invitation” to compare its conduct to that of defendants in other punitive damages cases. App., infra, 25a-26a. Instead, citing the three-Justice plurality’s rejection of a “comparative approach” in 7XO Production Corp. v. Al- liance Resources Corp., 509 U.S. 443, 458 (1993), the court based its reprehensibility “conclusion on the facts before us in this case alone.” App., infra, 26a. The Sixth Circuit has likewise expressed “war[iness] of any attempt to graft our ruling here onto another set of facts” because of its percep- tion that 7X¥O forecloses a comparative approach. Bach v. First Union Nat'l Bank, 486 F.3d 150, 156 (6th Cir. 2007). 10 But the TXO plurality did not affirmatively condemn comparisons with other cases; it merely refused to “enshrine” a comparative analysis as part of a “test.” 509 U.S. at 458. Indeed, as the Eleventh Circuit acknowledged (App., infra, 26a), the plurality “[did] not rule out the possibility that the fact that an award is significantly larger than those in appar- ently similar circumstances might, in a given case, be one of many relevant considerations.” /bid. (emphasis omitted). In any event, the plurality’s decision not to embrace any par- ticular “test” commanded only three votes, and the Court’s punitive damages jurisprudence has since taken a different path. Of particular significance, the Court in BMW directed lower courts to apply three guideposts when reviewing a pu- nitive award for excessiveness. 517 U.S. at 574-85. In de- scribing the reprehensibility guidepost, the Court explained “that some wrongs are more blameworthy than others.” /d. at 575. That is a tacit recognition that some comparison with the conduct in other cases is essential. Moreover, as the Court later emphasized in requiring “de novo” application of the guideposts, “‘assur[ing] the uniform general treatment of similarly situated persons * * * is the es- sence of law itself.’” Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 436 (2001) (quoting BMW, 517 U.S. at 587 (Breyer, J., concurring)). Disregarding the results in other cases is antithetical to the even-handed application of justice that this Court has required and is destined to lead to an upward spiral of punitive damages awards. As the Court has made clear, the reprehensibility guidepost is supposed to ensure that the amount of punitive damages is not out of pro- portion to “‘the enormity of [the] offense.’” BMW, 517 U.S. at 575. That objective becomes illusory if courts persist in evaluating the offense in isolation instead of placing it on a spectrum of punishable conduct informed by other punitive damages cases. Cf. Tellabs, Inc. v. Makor Issues & Rights, Lid., 127 S. Ct. 2499, 2510 (2007) (“The strength of an infer- ence cannot be decided in a vacuum. The inquiry is inher- 1] ently comparative * * *.”); BMW, 517 U.S. at 594 (Breyer, J., concurring) (“[a] punitive damages award of $2 million for intentional misrepresentation causing $56,000 of harm is ex- traordinary by historical standards”). Accordingly, the Eighth and Ninth Circuits and the Cali- fornia Supreme Court have recognized that the reprehensibil- ity guidepost requires courts to compare the misconduct at is- sue to the conduct in other punitive damages cases-—i.e., to place the conduct on a spectrum of reprehensibility. See, e.g., Bains LLC v. ARCO Prods. Co., 405 F.3d 764, 775 (9th Cir. 2005) (misconduct in connection with the performance of “a socially valuable task” is less reprehensible than conduct serving no legitimate purpose, such as “intentional, repeated ethnic harassment”); Asa-Brandt, Inc. v. ADM Investor Servs., Inc., 344 F.3d 738, 747 (8th Cir. 2003) (affirming $1.25 million punitive award for breach of fiduciary duty be- cause the misconduct, “according to the hierarchy of repre- hensiveness, was clearly more reprehensible than the conduct in [BMW], and is at a similar level to the conduct in State Farm”), Simon v. San Paolo U.S. Holding Co., 113 P.3d 63, 76 (Cal. 2005) (reducing punitive award from $1.7 million to $50,000 in part because the fraud at issue was “of relatively low culpability” compared to “the universe of cases warrant- ing punitive damages under California law”); cf. Goddard y. Farmers Ins. Co., 120 P.3d 1260, 1262, 1282-84 (Or. Ct. App. 2005) (reducing $25 million punitive award to $2,589,822 because defendant’s “manifestly malicious and deceitful” misconduct fell in the middle of the egregiousness spectrum when compared to other cases), modified on recon- sideration, 126 P.3d 682 (Or. Ct. App. 2006), rev. granted, 143 P.3d 239 (Or. 2006). This conflict potentially affects every punitive damages case because all reviewing courts must apply the reprehensi- bility guidepost. The issue is also very significant in this case: Had the Eleventh Circuit been willing to compare CCC's conduct —the failure to do more to prevent periodic 12 releases of carbon black during the manufacturing process— to the conduct of defendants in other punitive damages cases, the outcome likely would have been different. CCC’s con- duct involved a lesser degree of reprehensibility because car- bon black production is a “socially valuable” task. See Bains, 405 F.3d at 775. Moreover, other courts have reduced puni- tive awards to amounts well below $17.5 million even though the misconduct at issue was markedly more egregious than CCC’s periodic failure to prevent carbon black releases. In Boerner v. Brown & Williamson Tobacco Co., 394 F.3d 594 (8th Cir. 2005), for instance, the Eighth Circuit held that the defendant’s “conduct was highly reprehensible”: Pall Mall cigarettes were extremely carcinogenic and extremely addictive * * *; the sale of this defec- tive product occurred repeatedly over the course of many years despite American Tobacco’s knowledge that the product was dangerous to the user’s health; and American Tobacco actively misled consumers about the health risks associated with smoking. Moreover, the reprehensible conduct [led to] a mest painful, lingering death following extensive surgery. Id. at 602-03. The Eighth Circuit nevertheless reduced the $15 million punitive award to $5 million. /d. at 603. In Planned Parenthood, anti-abortion activists put up “WANTED” posters threatening doctors who provided abor- tions. 422 F.3d at 958. The risk of harm was so serious that the FBI “warned [the] physicians to purchase bullet proof vests.” /bid. Applying State Farm, the Ninth Circuit never- theless reduced punitive awards totaling $109 million to just over $4.7 million. 422 F.3d at 963. In Eden Electrical, Lid. v. Amana Co., 370 F.3d 824 (8th Cir. 2004), the district court could “hardly think of a more reprehensible case of business fraud.” /d. at 828-29. Yet the Eighth Circuit affirmed the district court’s determination that 13 the $17,850,000 punitive award was unconstitutionally ex- cessive and had to be reduced to $10 million. /hid. And in Kemp v. AT&T Co., 393 F.3d 1354 (11th Cir. 2004), AT&T was found to have participated in a “large- scale corporate” effort “to exploit customers who were un- sophisticated and economically vulnerable” by misleadingly presenting gambling debts as “legitimate” long-distance phone charges. /d. at 1363. Despite evidence indicating that “AT&T intended to target financially vulnerable individuals” with its illegal gambling scheme (ibid.), the Eleventh Circuit reduced the punitive damages from $1 million to $250,000, concluding that even $250,000 would be “a meaningful de- terrent to a corporation like AT&T.” /d. at 1365; see also Life Ins. Co. v. Johnson, 701 So. 2d 524, 526-29 (Ala. 1997) (re- ducing punitive damages from $15 million to $3 million where defendant engaged in pattern of selling worthless Medicare supplement policies to “elderly, uneducated, single black women”). Under no stretch of the imagination can CCC’s con- duct—which did not cause physical injury or target vulner- able individuals—-be placed in the same league of hcinous- ness as the conduct of these other defendants. Review is nec- essary to clarify whether the Eleventh Circuit erred in disre- garding the results in other cases, thereby allowing the aberrational award against CCC to stand.” * The Eleventh Circuit’s reprehensibility assessment is flawed even if CCC’s conduct is evaluated in isolation. First, the court stated that CCC “continued its course of action and inaction undeterred by both the prospect and reality of litigation.” App., infra, 25a. But uncontradicted evidence showed that CCC identified and remedied the causes of emissions when they occurred, repaired and replaced parts of its existing plant, and built new facilities to curtail emis- sions—all before judgment was entered. See p. 4, supra. Second, the court concluded that it was “of no consequence” “that Alabama permitted [CCC] to release carbon black into the atmosphere” because the permit did not allow for property dam- 14 B. There Is A Conflict Regarding The Maximum Permissible Ratio When Compensatory Damages Are “Substantial.” In State Farm, this Court explained that “[w]hen com- pensatory damages are substantial, then a lesser ratio, per- haps only equal to compensatory damages, can reach the outermost limit of the due process guarantee.” 538 U.S. at 425 (emphasis added). Heeding this guidance, several courts, including the Sixth and Eighth Circuits, have reduced puni- tive awards to amounts at or near compensatory damages when the latter were “substantial.”’ See, e.g., Bach, 486 F.3d at 156 (6th Cir.) (reducing $2,228,600 punitive award for violation of Fair Credit Reporting Act to $400,000, the amount of compensatory damages, because “the plaintiff has received a substantial compensatory award, and a ratio of 1:1 or something near to it is an appropriate result”); Clark v. Chrysler Corp., 436 F.3d 594, 608 (6th Cir. 2006) (reducing $3 million punitive award for death caused by defective truck design to $471,258.26, the amount of compensatory dam- ages); Boerner, 394 F.3d at 603 (8th Cir.) (reducing ratio age. App., infra, 25a-26a n.21. But the existence of a permit to emit carbon black reduces CCC's culpability by undercutting the argument that simply letting emissions occur was reprehensible. Third, the court suggested that the degree of reprehensibility was increased because of CCC's “willingness to elude accountabil- ity.” /d. at 25a. It relied in part on evidence that CCC “apparently” was warmed by ADEM prior to inspections. /bid. But even if such warnings occurred, there was no evidence that CCC affirmatively sought them. Punishing a defendant for actions by a third party raises serious due process concerns. See, e.g., United States v. Ash- land, Inc., 356 F.3d 871, 874 (8th Cir. 2004) (discussing “funda- mental{] unfair{ness]” of “punishing a defendant based solely on the conduct of another party”). * The jury found 50% comparative fault; thus, the plaintiff received only $235,629.13. Using this figure as the denominator, one mem- ber of the two-judge majority treated the punitive/compensatory 15 from 3.7:1 to 1.2:1 where compensatory damages were $4,025,000); Williams v. ConAgra Poultry Co., 378 F.3d 790, 798 (8th Cir. 2004) (reducing $6,063,750 punitive award for racial harassment to $600,000, the amount of com- pensatory damages); Jet Source Charter, Inc. v. Doherty, 55 Cal. Rptr. 3d 176, 178 (Cal. Ct. App. 2007) (reducing $26 million punitive award for repeated breaches of fiduciary duty and fraud to $6.5 million because |:] is maximum ratio when the harm is cconomic, the plaintiff is not vulnerable, and the compensatory damages are “‘substantial”).° Other lower courts have refused to follow this guidance, however. The Ninth Circuit has held that, “in cases where there are significant economic damages and punitive dam- ages are warranted but behavior is not particularly egregious, a ratio of up to 4 to | serves as a good proxy for the limits of constitutionality.” Planned Parenthood, 422 F.3d at 962. It allows even higher ratios if the behavior is more egregious. See ibid.; see also /n re Exxon Valdez, 490 F.3d 1066, 1093- 94 (9th Cir. 2007) (per curiam) (declaring 5:1 ratio permissi- bl -ven though compensatory damages and settlement pay- ratio as being 2:1. Clark, 436 F.3d at 606-07. The other member of the majority believed that the full amount of compensatory dam- ages should be used as the denominator and therefore considered the ratio to be 1:1. /d. at 613-14 (Kennedy, J., concurring). * See also Kent v. United of Omaha Life Ins. Co., 430 F. Supp. 2d 946, 959-60 (D.S.D. 2006), rev'd in part on other grounds, 484 F.3d 988 (8th Cir. 2007), Casumpang v. Int'l Longshore & Ware- house Union, Local 142, 411 F. Supp. 2d 1201, 1220 (D. Haw. 2005); Ceimo v. Gen. Am. Life Ins. Co., 2003 WL 25481095, at *2 (D. Ariz. Sept. 17, 2003), aff'd, 137 F. Appx 968, 970 (9th Cir. 2005) (unpublished), Walker v. Farmers Ins. Exch., 63 Cal. Rptr. 3d 507, 513 (Cal. Ct. App. 2007); Roby v. McKesson HBOC, 2006 WL 3775897, at *19 (Cal. Ct. App. Dec. 26, 2006) (unpublished in relevant part), rev. granted, 156 P.3d 1014 (Cal. 2007); Czarnik vy. Illumina, Inc., 2004 WL 2757571, at *t1 (Cal. Ct. App. Dec. 3, 2004) (unpublished). 16 ments totaled $513.i million, because conduct was in “mid- range” on spectrum of reprehensibility). Likewise, the Fed- eral Circuit has held that a 4:1 ratio is the “threshold where the punitive award may become suspect.” Rhone-Poulenc Agro S.A. v. DeKalb Genetics Corp., 345 F.3d 1366, 1372 (Fed. Cir. 2003) (upholding 3.33:1 ratio where compensatory damages were $15 million). And several state supreme courts have allowed ratios above 4:1 even when the compensatory damages exceeded several hundred thousand dollars.’ The current case deepens this conflict. The compensa- tory damages of $1,915,000 are indisputably “substantial” and afford respondents “complete compensation” for their in- juries. State Farm, 538 U.S. at 425-26. For example, one re- spondent recovered damages to remediate properties that tested negative for carbon black; another recovered damages to reimburse it for ordinary business debts (such as a mort- gage and a truck loan); and a third recovered damages for the emotional distress of worrying about the harm to his business allegedly caused by carbon black discoloration. See p. 6, su- pra. Yet the $17.5 million punitive award is over nine times higher. Even if the $1,294,000 award of attorneys’ fees for “bad faith” is added to the denominator, as the court of ap- peals held it should be, the ratio is still 5.5:1. ” See Seltzer v. Morton, 154 P.3d 561, 611 (Mont. 2007) (permit- ting $9.9 million in punitive damages where compensatory dam- ages were $1.1 million because “substantial compensatory dam- ages do not always require low single-digit ratios”); Union Pac. R.R. v. Barber, 149 S.W.3d 325, 348 (Ark. 2004) (upholding $25 million punitive award, even though compensatory damages were $5.1 million, because 5:1 ratio was not “breathtaking”); Campbell v. State Farm Mut. Auto. Ins. Co., 98 P.3d 409, 419 (Utah 2004) (holding, on remand, that 9:1 ratio comported with due process de- spite compensatory damages of $1 million); Trinity Evangelical Lutheran Church & Sch.-Freistadt v. Tower Ins. Co., 661 N.W.2d 789, 803 (Wis. 2003) (upholding $3.5 million punitive award that was over seven times the potential harm of $490,000). 17 Indeed, the Eleventh Circuit’s treatment of the attorneys’ fees implicates two additional splits. First, the courts are di- vided as to whether a reviewing court may enhance the de- nominator by the amount of attorneys” fees. In conflict with the Eleventh Circuit, the Utah Supreme Court has held that State Farm precludes doing so.* Second, whether or not it is appropriate to include attor- neys’ fees in the denominator, the courts are in disarray re- garding the significance of a large fee award to the exces- siveness inquiry. Taking no account of the fact that an award of attorneys’ fees has punitive and deterrent effects,” the Eleventh Circuit used the fee award to justify upholding an amount of punitive damages that it might otherwise have found excessive in relation to the compensatory damages. '° By contrast, the D.C. Court of Appeals has held that, because substantial attorneys’ fees include “‘a certain punitive ele- ment{,]”” they “favor{] a lesser rather than greater award of "In State Farm, the plaintiff argued that the denominator should include over $800,000 in attorneys’ fees and expenses in addition to $I million in compensatory damages. Resp. Br., 2002 WL 31387421, at *17n.5 (U.S. Oct. 17, 2002). This Court nevertheless stated that the ratio was 145:1 ($145 million to $1 million), not 80.5:1, the ratio if fees and expenses were included. 538 U.S. at 426. On remand, the Utah Supreme Court explained that “the con- siderable attention given by the Supreme Court to the issue of compensatory damages and the methodology for arriving at a con- stitutionally permissible ratio of compensatory to punitive dam- ages convinces us that we would not be at liberty to consider a substitute denominator.” 98 P.3d at 419. * See, e.g., City of Warner Robins v. Holt, 470 S.F.2d 238, 240 (Ga. Ct. App. 1996) (recognizing that attorneys” fees awarded un- der Georgia law “may often have a somewhat punitive cffect on the party against whom they are awarded” even if their primary purpose Is compensatory). ' See App., infra, 27a (finding it unnecessary to decide whether 9:1 ratio would be constitutional). 18 punitive damages.” Daka, Inc. v. McCrae, 839 A.2d 682, 701 n.24 (D.C. 2003). Similarly, the California Court of Appeal recently held that a 1:1 ratio was the constitutional maximum because the “substantial” emotional-distress damages and at- torneys’ fees contained a “punitive element.” Walker v. Farmers Ins. Exch., 63 Cal. Rptr. 3d 507, 513 (Cal. Ct. App. 2007). This Court’s review is necessary to resolve these con- flicts and provide guidance on the proper application of the ratio guidepost. C. There Is A Conflict Regarding The Propriety Of Speculating About Severe, But Highly Unlikely, Legislative Fines When Applying The Compara- ble Penalties Guidepost. This Court has instructed reviewing courts to consider legislatively established penalties for comparable conduct because principles of comparative institutional competence warrant giving “substantial deference” to “legislative judg- ments conceming appropriate sanctions for the conduct at is- sue.” BMW, 517 U.S. at 583 (internal quotation marks omit- ted). In addition, the magnitude of legislative penalties bears on whether the defendant had “fair notice” of the size of the punishment to which it could be subjected. /d. at 584. Fi- nally, this guidepost accounts for the fact that juries lack the expertisc, perspective, and resources of expert regulatory agencies. As Justice Breyer has aptly put it in an analogous context, it is “anomalous” to “grant greater power * * * to a single state jury than to state officials acting through state administrative or legislative lawmaking processes.” Med- tronic, Inc. v. Lohr, 518 U.S. 470, 504 (1996) (Breyer, J., concurring in part and concurring in the judgment). Perhaps because this Court has not yet provided a de- tailed analysis of this guidepost, lower courts consistently have expressed confusion about its proper application. As the Third Circuit remarked: “[T]he Supreme Court has not de- clared how courts are to measure civil penalties against puni- tive damages, and many courts have noted the difficulty in 19 doing so. We are similarly unsure as to how to properly ap- ply this guidepost, and we are reluctant to overturn the puni- tive damages award on this basis alone.” Willow Inn, Inc. v. Pub. Serv. Mut. Ins. Co., 399 F.3d 224, 237-38 (3d Cir. 2005) (citations omitted). In particular, the lower courts are divided regarding whether it is appropriate to compare the punitive damages to theoretical maximum penalties that are rarely if ever imposed in practice, or whether courts instead must focus on the pen- alties that realistically could be anticipated for the conduct before them. Though this Court in State Farm rebuked the Utah Supreme Court for “speculat[ing] about the loss of State Farm’s business license, the disgorgement of profits, and possible imprisonment” in the absence of any evidence that those fines realistically could have been imposed (538 U.S. at 428), some lower courts have disregarded this admonition when considering the relevance of highly severe-—but also highly unlikely—penalties. See, e.g., Mathias v. Accor Econ. Lodging, Inc., 347 F.3d 672, 678 (7th Cir. 2003) (noting that [w]e are sure that the defendant would prefer to pay the pu- nitive damages assessed in this case than to lose its license” even though there was no evidence that such a penalty was remotely possible for the conduct at issue); Greenberg v. Paul Revere Life Ins. Co., 91 F. App’x 539, 542 (9th Cir. Jan. 12, 2004) (observing in insurance bad-faith case that “possi- ble civil sanctions for this type of conduct include the sus- pension or revocation of an insurer’s licenses, which * * * could be worth hundreds of millions of dollars”); Union Pac. R.R. v. Barber, 149 $.W.3d 325, 350 (Ark. 2004) (holding in case involving train accident caused by failure to clear vege- tation near grade crossing that $25 million punitive award satisfied the third’ guidepost because it was “comparable” to “the total civil penalties authorized by law,” which court de- termined to be $9.9 million by adding the maximum daily state and federal fines for overgrown vegetation and treating each day as a separate violation). 20 This case is a perfect example. In analyzing the third guidepost, the Eleventh Circuit relied on a theoretical maxi- mum penalty that was virtually unthinkable in practice: While Alabama’s environmental statute authorizes ADEM to impose fines of $25,000 per violation up to a total of $250,000 “per order,” the court speculated that ADEM could have issued repeated orders, ultimately fining CCC “several million dollars.” App., infra, 30a-31a (citing Ala. Code § 22- 22A-5(18)(c)). Nothing in the record substantiates the court’s assumptions. ADEM never issued any orders because of fu- gitive emissions by CCC. Moreover, there is no indication that ADEM ever had, ever would, or even could, issue multi- ple retrospective orders so as to evade the $250,000 limit on its power to punish. Indeed, while the court of appeals stated that “evidence in the record indicates that [CCC] did indeed violate conditions of its permit” (App., infra, 31a), there was no evidence quantifying particular emissions. Thus, as the court ultimately admitted, it was engaging in pure conjecture. See ibid. (court was not “capable of guessing as to the fre- quency of Continental’s violations”). In contrast, the Sixth Circuit and other courts have fo- cused on more realistic penalties grounded in the evidence before the court. In Clark, for instance, a design defect in a truck had contributed to a driver’s death. 436 F.3d at 597. Under the version of 49 U.S.C. § 30165(a) in effect at the time, the National Highway Traffic Safety Administration (“NHTSA”) could issue fines for design defects of $1,000 per vehicle, up to a maximum of $800,000 for a related series of violations. /d. at 608. The district court held that the third guidepost supported the $3 million punitive award because NHTSA could theoretically issue penalties above $800,000 or revoke the defendant's business license in extreme cir- cumstances. /bid. The Sixth Circuit reversed, noting that no evidence in the record showed that such severe penaltics were realistic and citing State Farm’s warming against engag- ing in speculation. /bid. The court proceeded to hold that the B ies F, 21 “civil penalties that could be imposed for comparable con- duct do[} not support the award.” /bid. The Texas Supreme Court similarly refused to consider tne possibility that a car dealer would lose its license due to the fraud at issue because the plaintiff “provide[d] no proof that such a sancti»n has ever been awarded in a case like this.” Tony Gullo Motors I, L.P. v. Chapa, 212 $.W.3d 299, 309 (Tex. 2006). Likewise, the Guam Supreme Court con- cluded that the “‘maximum fine provided by the statute’” is irrelevant where it “bears no ‘relation to the egregiousness of the [fraud in the] case.’” Park v. Mobil Oil Guam, Inc., 2004 WL 2595897, at *16 (Guam Nov. 16, 2004). And the Arkan- sas Court of Appeals held that theoretically severe penalties, such as loss of license, had “no application” because there was no proof that a lesser sanction had been ineffective in the past, and “the record [did not] demonstrate conduct so egre- gious and so widespread that the civil penalty of business- closure was a real prospect” for the fraud at issue. Jim Ray, Inc. v. Williams, __ S.W.3d __, 2007 WL 1831790 (Ark. Ct. App. June 27, 2007); cf. Leatherman Tool Group, Inc. v. Cooper Indus., Inc., 285 F.3d 1146, 1149 (9th Cir. 2002) (re- ducing $4.5 million punitive award to $500,000 on remand from this Court because, “cven assuming that as a general matter ‘severe’ awards might be appropriate in some cases, [the plaintiff} has not shown that the award here was compa- rable to the amount that might have been recovered in civil penalties in a comparable case’’). Like the conflicts involving the other BMW guideposts, this tssue arises with considerable frequency in punitive damages litigation. Environmental cases are one example; of- ten, there are high per-day penalties for statutory violations but no evidence as to the actual number of violations or of the relevant agency’s actual fining practice. See, e.g., Johansen, 170 F.3d at 1337; City of Modesto Redevelopment Agency v. Dow Chem. Co., 2006 WL 2346275, at *14 (Cal. Super. Ct. Aug. 1, 2006) (unpublished). Insurance bad-faith SS cae eo 22 cases are another example; the statutory scheme often pro- vides for a range of penalties, including the loss of the in- surer’s license. See, e.g., State Farm, 538 U.S. at 428. This issue also is very important. Many lower courts al- ready tend to treat the comparable penalties guidepost as an inconsequential part of the punitive damages analysis. See, e.g., Exxon Valdez, 490 F.3d at 1094 (noting that, “[i]n sev- eral recent decisions we have not discussed the [third guide- post] at all,” and concluding that third guidepost supported $2.5 billion punitive award solely because “the matter of spilling oil in navigable water has clearly been taken quite se- riously by legislatures”) (citations omitted); Kemp, 393 F.3d at 1364 (the third guidepost “is accorded less weight in the reasonableness analysis than the first two guideposts”); James v. Horace Mann Ins. Co., 638 S.E.2d 667, 672 (S.C. 2006) (stating that statutory penalties have little relevance where they “were set at ‘such a low level, there is little basis for comparing it with any meaningful punitive damage award’”); Campbell, 98 P.3d at 419 (holding, on remand, that a wide disparity between $9,018,780.75 punitive award and $10,000 maximum legislative penalty for comparable con- duct was irrelevant because “the quest to reliably position any misconduct within the ranks of criminal or civil wrong- doing based on penalties affixed by a legislature can be quix- otic”); cf. Steel Techs., Inc. v. Congleton, __ $.W.3d _., 2007 WL 1790599, at *10 (Ky. June 21, 2007) (concluding that the third guidepost supported $1 million punitive award even though maximum fine was $10,000 because the “differ- ence [between the punitive award and maximum fine] is sig- nificantly less than that encountered in Gore and Campbell’). This guidepost will effectively become a nullity if courts can rely on high (but unlikely) theoretical maxima or assume away all possible limitations on the amount of fines, as the Eleventh Circuit did here. Review is necessary to make clear that the Eleventh Circuit should have focused on more realis- tic penalties. 23 il. THE ELEVENTH CIRCUIT’S DECISION IS REP- RESENTATIVE OF A PERVASIVE FAILURE AMONG THE LOWER COURTS TO HEED THE CONCERNS UNDERLYING THIS COURT’S PU- NITIVE DAMAGES CASES. This case also exemplifies a tendency of many courts to apply the guideposts mechanically without considering the core constitutional problems that led this Court to address this subject in the first place. As this Court has recognized, punitive damages “serve the same purposes as criminal pen- alties, [but] defendants subjected to punitive damages in civil cases have not been accorded the protections applicable in a criminal proceeding.” State Farm, 538 U.S. at 417. Civil ju- ries that are typically subject to few constraints, that lack the expertise of regulators, and that may even possess “biases against big business” (ibid.) can all too easily impose multi- million-dollar punitive awards that are “tantamount to a se- vere criminal penalty” (BMW, 517 U.S. at 585) and that dwarf “the size of such awards in the 18th and 19th centu- ries,” even after adjustment for inflation (Philip Morris, 127 S. Ct. at 1064). The Court accordingly has explained that “‘[i]t should be presumed [that] a plaintiff has been made whole for his inju- rics by compensatory damages, so punitive damages should only be awarded if the defendant's culpability, after having paid compensatory damages, is so reprehensible as to warrant the imposition of further sanctions to achieve punishment or deterrence.” State Farm, 538 U.S. at 419. Even if some puni- tive damages are appropriate, the reviewing court should consider whether “‘a less drastic remed[y] could be expected to achieve [adequate punishment and deterrence].” BMW, 517 U.S. at 584. This guidance reflects the basic understanding that, while punitive damages are an important means of achieving punishment and deterrence, they are not the only way to ac- complish those objectives. “Punitive damages aside,” ran 24 “[djeterrence * * * operates through the mechanism of dam- ages that are compensatory.” Memphis Cmty. Sch. Dist. v. Stachura, 477 U.S. 299, 306-07 (1986) (emphasis in origi- nal).'' Awards of attorneys’ fees also “provide significant de- terrence.” Smith v. Wade, 461 U.S. 30, 94 (1983) (O’Connor, J., dissenting). And so does injunctive relief. Cf. Jn re Exxon Valdez, 270 F.3d 1215, 1244 (9th Cir. 2001) (various costs incurred by defendant as a result of its conduct “should be considered as part of the deterrent already imposed”). Likewise, compensatory damages and awards of attor- neys’ fees often can have a punitive effect. See State Farm, 538 U.S. at 426 (“Much of the distress was caused by the outrage and humiliation the Campbells suffered at the actions of their insurer; and it is a major role of punitive damages to condemn such conduct. Compensatory damages, however, already contain this punitive element.”); pp. 17-18, supra. The guideposts announced in BMW and refined in State Farm were supposcd to help courts determine when a puni- tive award exceeds the amount needed to punish and deter and therefore constitutes an arbitrary deprivation of property. Some courts have kept this ultimate inquiry in mind, reduc- ing large punitive awards to an amount at or below the com- pensatory damages or throwing them out entirely after taking into account the punitive and deterrent effects of the compen- satory award and other obligatory payments. In Inter Medical Supplies, Ltd. v. EB] Medical Systems, Inc., 181 F.3d 446 (3d Cir. 1999), for instance, the jury '' See also 1 Dan B. Dobbs, LAw OF REMEDIES § 3.1, at 282 (2d ed. 1993) (“{e]ven if the defendant is not subject to punitive dam- ages, an ordinary compensatory damages judgment can provide an appropriate incentive to meet the appropriate standard of behav- ior”); Clarence Morris, Punitive Damages in Tort Cases, 44 HARV. L. REV. 1173, 1182 (1931) (“ifthe ‘compensatory’ damages are large, the defendant is severely admonished without the addition of any punitive damages”). 25 awarded over $100 million in punitive damages and $48 mil- lion in compensatory damages for breach of contract and fraud. The district court reduced the punitive award to $50 million. /d. at 454. The Third Circuit held that the reduced punitive award was still unconstitutionally excessive. /d. at 467. As the court explained, the plaintiff was not “weak” and “the harm inflicted on [it] was economic * * * and hence ‘less worthy of large punitive damages awards than torts in- flicting injuries to health or safety.’” /bid. Moreover, “large compensatory damages have been awarded.” /bid. The court accordingly held that $1 million was the constitutional maximum because a greater amount was “not ‘reasonably necessary to punish and deter.’” /d. at 470 (quoting Pac. Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 22 (1991)). Similarly, in Chicago Title Insurance Corp. v. Mag- nuson, 487 F.3d 985 (6th Cir. 2007), the jury awarded $32.4 million in punitive damages and $10.8 million in compensa- tory damages for tortious interference with a contract. The Sixth Circuit held that a new trial was required on damages, but no punitive damages would be allowed. /d. at 998. The court reasoned that there “were no physical injuries or threat to personal safety as a result of [the misconduct]}” or any evi- dence of recidivism. /d. at 1001. And the plaintiff “was not a financially vulnerable victim.” /bid. Thus. the court held, while there was evidence of malice, this evidence did not by itself prove that ““‘the defendant’s culpability, after having paid compensatory damages, is so reprehensible as to warrant the imposition of further sanctions to achieve punishment or deterrence.’” /bid. (quoting State Farm, 538 U.S. at 419). Likewise, in. Pichler v. UNITE, 457 F. Supp. 2d 524 (E.D. Pa. 2006), a federal district court in Pennsylvania de- nied a request for punitive damages under the Driver's Pri- vacy Protection Act (“DPPA”™), 18 U.S.C. § 2724. There, a union had violated DPPA by recording certain license plate numbers to get the owners’ addresses from motor vehicle re- cords. Pichler, 457 F. Supp. 2d at 530. The court held that 26 punitive damages were inappropriate, even if the union’s be- havior was willful and reckless. Jd. at 531. The union had discontinued the illegal activity before judgment and knew that it would have to pay “costly damage awards” for future DPPA violations. /d. at 532. This sufficed “to achieve deter- rence without imposing punitive damages.” /bid. Moreover, the statutory damages were over $4 million, and the attor- neys’ fees and costs were likely to be “considerable.” /bid. These awards would “amply punish[]” the union for its mis- conduct. /bid. Thus, “mindful” of State Farm’s admonition that punitive damages should be awarded only if necessary to achieve punishment or deterrence (id. at 531), the court disal- lowed punitive damages (id. at 532). Regrettably, these decisions are in the minority: Many lower courts have misunderstood (or even affirmatively flouted) this Court’s guidance and upheld multi-million- dollar punitive awards even when compensatory damages were “substantial” and “a more modest punishment” would have sufficed. State Farm, 538 U.S. at 419-20, 425. The Utah Supreme Court’s decision on remand in State Farm is illus- trative. Though this Court suggested that a punitive award “at or near” the $1 million compensatory award was the constitu- tional maximum (id. at 429), the Utah Supreme Court upheld more than $9 million in punitive damages (98 P.3d at 413). Another example is the Ninth Circuit’s recent decision in Exxon Valdez. There, the court allowed $2.5 billion in puni- tive damages to a class of fishermen following th: Exxon Valdez tanker disaster—“the largest punitive damages award affirmed by a federal court” (490 F.3d at 1071 (Kozinski, J., dissenting from denial of rehearing)}—cven though Exxon spent $2.1 billion remediating the harm, paid $513.1 million in compensatory damages and settlement payments to the plaintiffs, and paid the United States and Alaska $125 mil- lion in fines and $900 million for damage to the environment. The dissenting judge, meanwhile, would have upheld the en- tire $4.5 billion punitive award because it was a single-digit 27 multiple of the compensatory damages and settlement pay- ments. See id. at 1102 (Browning, J., dissenting). The present case is another excellent example. The $17.5 million punishment here is “many times the size of [punitive] awards in the 18th and 19th centuries” (Philip Morris, 127 S. Ct. at 1064) and “is tantamount to a severe criminal penalty” (BMW, 517 U.S. at 585). The most realistic comparable pen- alty is no more than $250,000 (1/70th of the punitive award). See p. 20, supra. And by no means does the misconduct here fall in the upper echelons of reprehensibility. See pp. 11-13, supra. Finally, the jury awarded substantial compensatory damages of $1,915,000 as well as $1,294,000 in attorneys’ fees for “bad faith,” while the district court ordered extensive injunctive relief that has cost CCC millions more. These awards and costs provide significant punishment and deter- rence in their own right and eliminate the need for $17.5 mil- lion in “further sanctions.” State Farm, 538 U.S. at 419; see also pp. 23-24, supra. The Eleventh Circuit nevertheless up- held the entire punitive award by manipulating the ratio of punitive to compensatory damages to get it into the mid- single digits and reading State Farm to allow such ratios whenever there is a “finding of reprehensibility” (App., infra, 29a). These examples are far from unique: Numerous other courts also have missed this Court’s point, giving single-digit ratios a constitutional “free pass” even when the compensa- tory damages exceeded several hundred thousand dollars and a lower punitive award might have satisfied the objectives of punishment and deterrence. = See, e. g., Cumbio Health Solutions, LLC v. Reardon, 2007 WL 627834, at *7 (6th Cir, Feb. 27, 2007) (unpublished) (upholding $5 million punitive award that was 5.65 times the compensatory dam- ages and prejudgment interest of $884,291.18 because it was “well within the Supreme Court's single-digit prescription”); Stogsdill v. Healthmark Partners, L.L.C., 377 F.3d 827, 833 (8th Cir. 2004) 28 The fundamental error of these courts is their belief that the second guidepost is not merely one of several possible indicia of excessiveness, but instead is a safe harbor for mas- sive exactions. That premise seriously misunderstands this Court’s precedents. BMW indicates that “[i]n most cases, the (holding that $2 million punitive award was permissible, even though “the compensatory damages award [of $500,000] is sub- stantial * * * and the punitive damages award is many times [the defendant’s}] net worth” because this Court approved a 4:1 ratio in Haslip), Rhone-Poulenc, 345 F.3d at 1372 (Fed. Cir.) (taking no account of the absolute amount of the punitive award and reason- ing that the 3.33:1 ratio of punitive to compensatory damages “does not even approach the possible threshold of constitutional impropriety”); Zhang v. Am. Gem Seafoods, Inc., 339 F.3d 1020, 1044 (9th Cir. 2003) (upholding $2.6 million punitive award where compensatory damages were $260,000, because the ratio was “slightly more than seven to one” and “[w]e are aware of no Su- preme Court or Ninth Circuit case disapproving of a single-digit ratio between punitive and compensatory damages”); Bogle v. McClure, 332 F.3d 1347, 1362 (11th Cir. 2003) (upholding ap- proximately $2 million in punitive damages to each of seven de- fendants despite “substantial” compensatory damages of $500,000 because the ratio “in this case is in the neighborhood of 4:1, a range which the Supreme Court has found to be ‘instructive’”), Greenberg, 91 F. App’x at 542 (upholding $2.4 million punitive award in insurance bad faith case in which compensatory damages were $547,445.42 on ground that 4.4:1 ratio at issue was “similar to the 4:1 ratio in BMW and well within the ‘single digit ratio’ that marks the outer limits of permissible disparities”); Advocat, Inc. v. Sauer, 111 S.W.3d 346, 361 (Ark. 2003) (allowing $21 million punitive award that was 4.2 times the remitted compensatory dam- ages of $5 million, because a ratio of 4.2:1 is not “breathtaking”); Seltzer, 154 P.3d at 611 (Mont.) (discussed above at p. 16 n.7); Bocci v. Key Pharms., Inc., 76 P.3d 669, 675 (Or. Ct. App.) (stat- ing that 4:1 “apparently is something of a benchmark for the United States Supreme Court,” and reducing 45:1 ratio to 7:1 where compensatory damages were $500,000), modified, 79 P.3d 908 (Or. Ct. App. 2003). 29 ratio will be within a constitutionally acceptable range, and remittitur will not be justified on this basis.” 517 U.S. at $83 (emphasis added). It does not say that, if the ratio is modest, the punitive award is perforce permissible. Rather, as dis- cussed above, BMW, State Farm, and Philip Morris all sug- gest a broader concern with the risk of arbitrariness that arises when the absolute amount of punitive damages ex- ceeds the fine that would be imposed in a criminal proceed- ing attended by full criminal safeguards or in an administra- tive proceeding supervised by an expert agency. This Court’s cases also reflect the paramount principle that no award should be greater than reasonably necessary to serve the State’s goals of deterrence and retribution. Applica- tion of that limiting principle necessarily entails considering the deterrent effect of other forms of liability imposed upon the defendant as a consequence of its punishable conduct. The courts that treat the ratio guidepost as a safe harbor have lost sight of this critical consideration entirely. Because the Eleventh Circuit committed precisely that error here, review is warranted to make clear that a single- digit ratio is not a free pass. This case presents an excellent opportunity to remind the lower courts that they must scruti- nize the absolute size of punitive awards to ensure that fines that could or would never be imposed by a criminal sentencer or expert administrative agency are not levied through the civil process with its comparatively weaker protections and that, in determining whether an award is excessive, they must take account ef other deterrents faced by the defendant. Iii. THIS COURT SHOULD GRANT PLENARY RE- VIEW IN BOTH THIS CASE AND EXXON VAL- DEZ OR, ALTERNATIVELY, GRANT REVIEW IN ONE AND HOLD THE OTHER. As discussed above, the Eleventh Circuit’s analysis of the ratio and reprehensibility guideposts relied on the Ninth Circuit's decision in Exxon Valdez. App., infra, 26a, 29a. 30 Exxon has recently filed a petition for certiorari, arguing, among other things, that the Ninth Circuit’s treatment of the ratio and comparative penalties guideposts was fundamen- tally unsound. See Exxon Shipping Co. v. Baker, No. 07-219. Given the similar issues raised by these cases, the Court should grant plenary review in both to provide maximum guidance to the lower courts. In recent years, this Court has followed this practice in cases involving constitutional chal- lenges to school assignment plans,'° criminal sentencing,’ and religious displays.'° Granting both petitions is especially warranted here because, as in Philip Morris, Exxon has raised issues that, if decided in its favor, would make it un- necessary for this Court to reach Exxon’s excessivencss ar- guments. At minimum, the Court should grant review in one of the cases and hold the other. See Robert L. Stern et al., SUPREME COURT PRACTICE § 4.16, at 255 (8th ed. 2000) (““Where the petition for certiorari presents a question that is identical with, or similar to, an issue already pending before the Su- preme Court in another case in which certiorari has been granted, the issue is obviously important and the Court will either grant the petition and set the case for argument or postpone consideration of the petition until the other case has been decided and then make summary disposition of the case in accordance with that decision.”’). CONCLUSION The petition for a writ of certiorari should be granted. '* Parents Involved in Cmty. Sch. v. Seattle Sch. Dist. No. 1, 126 S. Ct. 2351. (2006); Meredith v. Jefferson Cty. Bd. of Educ., 126 S. Ct. 2351 (2006). * Rita v. United States, 127 S. Ct. 551 (2006); Claiborne v. United States, 127 S. Ct. 551 (2006). '* McCreary Cty. v. ACLU, 543 U.S. 924 (2004); Van Orden v. Perry, 543 U.S. 923 (2004). por Frere” Mae ee ae [71 eae J cS Respectfully submitted. H. THOMAS WELLS, JR. EVAN M. TAGER PETER S. FRUIN Counsel of Record Maynard, Cooper & Gale NiCKOLAIG. LEVIN 1901 Sixth Ave. North Mayer, Brown, Rowe & 2400 AmSouth/Harbert Maw LLP Plaza 1909 K St., NW Birmingham, AL 35203 Washington, DC 20006 205) 254-1000 (202) 263-3000 J. BRETT BUSBY Mayer, Brown, Rowe & Maw LLP 700 Louisiana St., Suite 3400 Houston, TX 77002 (713) 238-2606 Counsel for Petitioners AUGUST 2007 APPENDICES ee seat Ri nee PT PROTEC RT MA gt POE Oe a Ee TR LO ee! Pe ae v7 % ie Da ll ee. Geet ag A LE Ft ee REALS ns APPENDIX TABLE OF CONTENTS Appendix A: Opinion of the United States Court of Appeals for the Eleventh Circuit (Mar. Be end ethee aia aaa satin Sedat was socieguennbsives oxecveccesceses la-32a Appendix B: Opinion and Order of the United States District Court for the Middle District of Alabama Denying Defendants’ Motion for Judgment as a Matter of Law or, in the Alternative, Motion for New Trial or, in the Alternative, Motion for Remittur (Jan. 23, Appendix C: Injunctive Relief Order by the United States District Court for the Middle District of Alabama (July 5, 2005)............0.0..0000... 48a-54a Appendix D: Order of the United States Court of Appeals for the Eleventh Circuit Denying Petition for Rehearing and Rehearing En I IN I a Na sl sseaveduenvnrnesiis 55a Appendix E: Final Judgment as to Claims Sub- mitted to Jury for the United States District Court of the Middle District of Alabama Sir Me I hcdedetah Ceca dscchi ad scenester oineccvipacukececcesmueces 56a Appendix F. Additional Statutory Provisions .................... 57a as ‘s i ~ 3 a > eat sy , la APPENDIX A United States Court of Appeals, Eleventh Circuit. ACTION MARINE, INC., John Tharpe, et al., Plaintiffs- Appellees, v. CONTINENTAL CARBON INCORPORATED, China Syn- thetic Rubber Corporation, Defendants-Appellants. No. 06-11311 March 21, 2007 Before DUBINA and WILSON, Circuit Judges, and CORRIGAN, * District Judge. DUBINA, Circuit Judge: Appellants, Continental Carbon Co., Inc. (“CCC”), and its parent company, China Synthetic Rubber Corp. (“CSRC”) (collectively, “Continental”),' defendants in the underlying lawsuit, appeal the district court’s denial of their post-trial motion for judgment as a matter of law or, in the alternative, a new trial or, in the alternative, an amendment of the final judgment (hereinafter “post-trial motion”). Having reviewed the parties’ briefs and the evidence in the record, and with the benefit of oral argument, we affirm the district court's order and the judgment entered on the jury's verdict. * Honorable Timothy J. Corrigan, United States District Judge for the Middle District of Florida, sitting by designation. ' CSRC’s relationship with CCC was the subject of some dispute during this litigation, including the trial; however, in this appeal. CSRC does not challenge the district court’s finding that it is CCC's parent corporation, and CSRC does not now deny making decisions that exposed it to liability in the instant case. Nor do the defendants contend that information known by CCC's manage- ment should not be imputed to CSRC. 2a I. BACKGROUND A. Facts Continental owns and operates a manufacturing plant in Phenix City, Alabama, that produces carbon black, a sub- stance the company describes as follows: a highly engineered product manufactured by heat- ing feedstock oil to a high temperature in a low- oxygen reactor. The resulting product is smoke that includes both carbon black and waste gases. The carbon black is separated from the gases, processed, and formed into small pellets for case of handling and shipment. [Continental] sells carbon black for use in making tires, rubber and plastic items, inks, and other . . . products. [ Appellants’ Br. at 3 (citations to the record omitted)]. According to trial testimony, the separating process oc- curs in stages using filters located in what is known in the in- dustry as bagfilter compartments. Pressurized smoke carrics carbon black through the compartments, where the bagfilters capture the carbon black. In a closed system such as exists in the Phenix City plant, if everything is working perfectly, no carbon black should escape, and the remaining gasses are ex- pelled through exhaust towers. Originally, the Phenix City plant housed one production unit (“Unit 1°). Although Continental received complaints from neighboring property owners regarding carbon black emissions from this unit, the damage giving rise to the pre- sent lawsuit occurred in conjunction with Continental’s ef- forts to double the plant’s production by commissioning a second unit in 1999 (“Unit 2”). Along with the construction of Unit 2, Continental installed a thermal oxidizer for the purpose of combusting any carbon black particles that escape either production unit before the air emanating from the bag- filter compartments is expelled. poe 1a 3a The appellees (collectively, “the property owners’’), which include the City of Columbus, Georgia (“the City”), own property located across the Chattahoochee River and within approximately | 1/2 miles from Continental’s Phenix City plant.’ The property owners, all of whom are Georgia ‘citizens, also include Action Marine, Inc. (“Action Marine”), which during the relevant time operated a retail boat sales and maintenance business along the river; John Tharpe (“Tharpe”), Action Marine’. sole shareholder and principal agent; and Owen Ditchfield (“Ditchfield”), who owns a resi- dence and rental home in the area. According to the property owners, the Phenix City plant repeatedly emitted carbon black into the air, which then car- ried the pollutant, known to be oily, adhesive, and penetrat- ing, onto their properties, thereby darkening them. Specifi- cally, the City contends that the carbon black damaged the Columbus Civic Center both externally and internally via the facility’s air intake system. Other City-owned properties al- legedly damaged include recreational facilities located in the City’s South Commons Sports and Entertainment Complex as well as Rigdon Park. In pursuing this civil action, the City sought damages for cleanup and monitoring costs. Ditchfield sought damages for cleanup costs, diminution of property value, and emotional distress in connection with carbon black contamination of both of his properties. Action Marine alleges that the carbon black damaged its inventory of boats to such an extent that the company was forced to sell those it could at a loss. Creditors eventually re- possessed Action Marine’s boat inventory, which Tharpe had personally guaranteed, and the business shut down. Action Marine sought damages to recover for the lost value of its business. ~ Some of the properties are only approximately a 1/2 mile from Continental’s Phenix City plant. ‘ “4 4a When Action Marine’s creditors failed to recoup all that was owed from the company, they pursued deficiency judg- ments against Tharpe personally. To make matters worse, unable to return customers’ boats in a clean condition and thought by some to be selling used boats as new, Tharpe be- came the butt of jokes among the fishermen who had for- merly patronized his business. Tharpe therefore sought dam- ages for emotional distress and loss of reputation. Importantly, the property owners accused Continental of intentionally damaging their properties. They claimed that Continental chose to continue operating its Phenix City plant despite knowing that the plant’s constant leaks were pollut- ing their properties. Rather than fix the leaks, the property owners contend, Continental engaged in a strategy of denial, deception, and subterfuge. Therefore, the property owners sought punitive damages. B. Procedural History Alleging diversity jurisdiction pursuant to 28 U.S.C. § 1332 (2000), Action Marine and Tharpe originally filed this lawsuit as a class action stating common law tort claims of negligence, wanton conduct, breach of duty to wam, fraud, misrepresentation, deceit, nuisance, trespass, and strict liabil- ity. In addition to Continental, named defendants included Taiwan Cement Corp. (“Taiwan”) as well as Charles Barry Nicks (“Nicks”) and Todd Miller (“Miller”), both individu- ally and in their representative capacity as agents of Conti- nental. Eventually, the City, Ditchfield, and Phillips Homes, Inc. (“Phillips”), were added as plaintiff class representatives, but the district court subsequently denied class certification. The district court then granted summary judgment in favor of Taiwan and the individual defendants, Nicks and Miller, on all claims against them. The court also granted summary judgment in favor of the remaining defendants on the claims of fraud, misrepresentation, deceit, and strict liability as well ag \ we y “ a ig be: BY a SE Ee een RN a Ee NE RT me ON HERE ge CIE eR EE BRE a OER a BTR Stary. DEON Pree ale * ~~ + * e « 4 A : . » on ae » >! <7 } +5 Om, eke Soy 2 Sa as the City’s and Action Marinc’s claims for emotional dis- tress. Phillips stipulated to a dismissal of its claims without prejudice, and the remaining plaintiffs acquiesced in the dis- missal of the claim alleging a breach of a duty to warn. Therefore, the lawsuit proceeded to trial on the property owners’ claims of negligence, wanton conduct, nuisance, and trespass. After a 10-day trial, an Alabama jury returned a verdict in favor of the property owners on all claims and determined that Continental’s actions warranted punitive damages. The jury awarded compensatory damages in the amounts of $45,000 to Ditchfield; $100,000 to Tharpe; $570,000 to the City; and $1.2 million to Action Marine for a total of $1,915,000. The jury also awarded $1,294,000 in attorney fees and assessed punitive damages at $17.5 million. Following entry of the final judgment on the jury’s ver- dict, Continental timely filed its post-trial motion challenging the sufficiency of the evidence presented in support of the tort claims as well as the amount and propriety of the com- pensatory and punitive damages awarded. Prior to ruling on the motion, the district court determined that the property owners were entitled to permanent injunctive relief, to which the parties later consented. Approximately six months after entry of final judyiment on the claims for injunctive relicf, the district court denied Contincental’s post-trial motion. Conti- nental now appeals that decision.” Il. ISSUES 1. Whether the evidence was sufficient to reasonably in- fer that carbon black was a cause-in-fact of the alleged dis- coloration. 2. Whether the evidence was sufficient to reasonably in- fer that Continental acted with the mental state required by ‘ Continental concomitantly appealed the award of injunctive re- lief; we have already dismissed that aspect of the appeal as un- timely. 6a Georgia law to prove the property owners’ claims and lift Georgia’s statutory cap on punitive damages awards. 3. Whether the compensatory damages awarded to Ac- tion Marine were improper. 4. Whether Tharpc, as personal guarantor of Action Ma- rine’s debt and its principal agent, may pursue a claim against Continental for emotional distress and/or loss of reputation. 5. Whether the punitive damages award was unconstitu- tionally excessive. lil. STANDARDS OF REVIEW We review the “denial of a motion for judgment as a mattcr of law de novo, and will reverse only if ‘the facts and inferences point overwhelmingly in favor of one party, such that reasonable people could not arrive at a contrary ver- dict.”” Flury v. Daimler Chrysler Corp., 427 F.3d 939, 945 n. 12 (11th Cir. 2005), cert. denied, 126 S. Ct. 2967 (2006). De novo review is the proper standard also for reviewing the dis- trict court’s denial of judgment as a matter of law with re- spect to the claims for punitive damages. Boyd v. Homes of Legend, Inc., 188 F.3d 1294, 1298 n. 9 (11th Cir. 1999) (not- ing that the issue “presents a pure question of law’); see also Toole v. Baxter Healthcare Corp., 235 F.3d 1307, 1317 (11th Cir. 2000). The district court’s denial of a motion for a new trial is reviewed for an abuse of discretion. Middlebrooks v. Hill- crest Foods, Inc., 256 F.3d 1241, 1247 (11th Cir. 2001). “Deference to the district court ‘is particularly appropriate where a new trial is denied and the jury’s verdict is left un- disturbed,”” as in this case. /d. at 1247-48 (quoting Rosen- field v. Wellington Leisure Prods., Inc., 827 F.2d 1493, 1498 (11th Cir. 1987)). Finally, the istrict court’s decision to sustain the amount of compensatory and punitive damages awards pur- suant to state law is reviewed for “clear abuse of discretion.” 7a Middlebrooks, 256 F.3d at 1249. Its decision that the punitive damages award does not run afoul of the federal Constitution, however, is subject to de novo review, though we “defer to the District Court’s findings of fact unless they are clearly er- roneous.” Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 436, 440 n.14, 121 S. Ct. 1678, 1685-86, 1688 n.14 (2001). IV. DISCUSSION A. Causation Continental contends that the evidence at trial was insuf- ficient to support an award with respect to any of the prop- erty Owners’ tort claims. Focusing solely on the scientific evidence offered through the parties’ experts, Continental ar- gues that the property owners failed to prove that carbon black, as opposed to other ostensibly dark substances, caused any of the damage alleged. Alternatively, according to Conti- nental, the scientific evidence similarly failed to demonstrate that the damage attributable to carbon black was “substan- tial,” which Continental argues is required to prove the tres- pass and nuisance claims. 1. In General According to Continental, chemical analyses conducted by the parties’ experts failed to establish the presence of any carbon black on several of the City’s properties at issue and, with respect to all but one of the remaining properties, estab- lished a concentration of less than one percent of the total dark material on the property. Consequently, Continental contends, the testing proved at most that carbon black caused de minimis damage. At oral argument, the property owners conceded that two of the propertics allegedly damaged, for which the jury awarded compensatory damages, tested negative for carbon black but contended nonctheless that the location of these two properties and the similarity between their discoloration and that of the neighboring properties that tested positive for 8a carbon black allow for an inference that carbon black caused the damage alleged.* The property owners rely on circum- stantial evidence as well to counter Continental’s claim that the positive test results revealed only trace amounts of carbon black. The scope of our inquiry is defined by the arguments raised in the parties’ briefs. Importantly, Continental does not dispute that all of the properties at issue were discolored and does not contend that the discoloration itself was insubstan- tial. Nor does Continental contend that the observable discol- oration of the properties differed materially from one prop- erty to another. Furthermore, Continental does not attempt to convince us that the discoloration was not suggestive of car- bon black. Instead, Continental contends that no reasonable * The property owners focus on the issue of proximate cause. Con- tinental’s relevant arguments are limited to the issue of factual causation, however, and Continental actually acknowledges that cases addressing the issue of proximate cause “are inapposite.” [Reply Br. at 7 n.6]. Therefore, we are concerned only with factual causation. > Continental denies the ability to accurately identify carbon black with the naked eye; however, evidence in the record includes con- tradictory testimony from CCC employees. For example, Ng-Leng Lee, a plant manager for CCC and at one time plant manager in Phenix City, testified at his deposition that he believed CCC em- ployee Greg Johnstone, who had reported a complaint of carbon black fallout, was capable of recognizing carbon black pollution upon seeing it. In addition, Nicks testified that he paid a car dealer- ship with his own money to have cars cleaned after inspecting the vehicles and satisfying himself (though not to a scientific cer- tainty) that the cars had been blanketed with carbon black from the Phenix City plant. Also, the property owners’ microscopist, Garth Freeman, Ph.D., who specializes in carbon analysis, testified that the effects of carbon black deposits are visible without a micro- scope and “can form a comet appearance when it lands on mate- rial, and so in some circumstances there are physical appearances 9a fact finder could conclude that the discoloration was in fact caused by carbon black without a chemical analysis estab- lishing the presence of carbon black in such concentrations as to compel the conclusion that carbon black, and nothing else, caused the alleged discoloration. Our substantive legal analysis in this diversity case is governed by Georgia law, which provides that “[a]s a general rule, issues of causation are for the jury to resolve and should not be determined by a trial court as a matter of law except in plain and undisputed cases.” Ogletree v. Navistar Int'l Transp. Corp., 535 S.E.2d 545, 548 (Ga. Ct. App. 2000). With respect to factual causation . . . [, while] a reasonable inference sufficient to create a trial issue of fact cannot be based on mere possibil- ity, conjecture, or speculation . . . [, t]he plain- tiff [nccd only] . . . introduce evidence which affords a reasonable basis for the conclusion that it is more likely than not that the conduct of the defendant was a cause in fact of the re- sult. /d. (citations & quotations omitted) (emphasis added). Viewed in the plaintiffs’ favor, the evidence at trial, which inciuded numerous documents and photographs as well as testimony from Ditchfield, Tharpe, the Mayor of Co- lumbus, employees (past and present) of CCC, and experts in microscopy, air quality, and wind direction modeling, tended to show that (1) Continental's Phenix City plant emitted car- bon black on numerous, perhaps innumerable, occasions dur- ing the relevant time period; (2) wind carrying carbon black from the Phenix City plant frequently blew toward the prop- erty owners’ properties; (3) the propertics were in close prox- imity to the plant; (4) the properties all were similarly discol- ored; and (5) the dark substance on the properties was at least of the way carbon black might deposit that would strongly indicate that that was carbon black.” [Trial Tr. at 862). 10a reasonably suggestive of carbon black. Furthermore, most of the samples the property owners’ expert obtained from the properties tested positive for carbon black, and the properties that tested negative were located immediately adjacent to properties with positive test results. Surely a fact finder would welcome a chemical analysis establishing to a scientific certainty the presence and precise concentration of the pollutant on the properties allegedly damaged. In the instant case, the jury was free to hold the property owners accountable for failing to provide such cer- tainty, but Continental has failed to cite any Georgia case that requires the property owners to establish scientific certainty.° We conclude that such precision is not necessary in this case. The evidence in the record provides a reasonable basis for concluding that Continental’s carbon black caused the dis- coloration alleged.’ Georgia law requires nothing more. 2. Substantial Damage Continental contends that the property owners cannot succeed on their trespass and nuisance claims unless they can prove that the damage caused by carbon black was “substan- tial.” [Appellant’s Br. at 20]. We do not need to decide whether Continental’s view of Georgia law is correct. As already noted, Continental does not contend that the discoloration alleged by the property owners was insubstan- tial. Relying again on the results of the microscopic analyses * Satterfield v. J.M. Huber Corp., 888 F. Supp. 1567, 1570-71 (N.D. Ga. 1995), the case on which Continental primarily relies, is inapposite because the Satterfield court relied on a lack of evi- dence, generally, and specifically noted the lack of any expert tes- timony whatsoever regarding the issue of causation. ” We note that the only other circuit to address a similar argument in a case factually on point is in agreement. Bradley v. Armstrong Rubber Co., 130 F.3d 168, 173-74 (Sth Cir. 1997) (concluding that scientific testing was not required for a jury to infer the presence of carbon black). lla conducted by the parties’ experts, Continental merely con- tends that the property owners failed to demonstrate that car- bon black was the cause of this damage. Because we have al- ready determined that the property owners’ circumstantial evidence was sufficient to prove that carbon black caused the discoloration, it follows that the evidence also was sufficient to prove that carbon black caused substantial damage to all of the properties. Holman v. Athens Empire Laundry Co., 100 S.E. 207, 210 (Ga. 1919) (holding that for smoke to consti- tute a nuisgnce “it must be such as to produce a visible, tan- gible, and appreciable injury to property”). B. Continental's Culpability Continental contends that the evidence was insufficicnt to satisfy the scienter requirements of the property owners’ wanton conduct, trespass, and punitive damages claims as well as that which is necessary to overcome Georgia’s cap on punitive damages. The latter standard requires a showing of “specific intent to cause harm” and thus erects the highest scienter obstacle the property owners necded to overcome.” *“{W]anton conduct is that which is ‘so reckless or so charged with indifference to the consequences . . . as to justify the jury in finding a wantonness equivalent in spirit to actual intent.” //endon v. DeKalb County, 417 S.E.2d 705, 712 (Ga. Ct. App. 1992) (quot- ing Truclove v. Wilson, 285 S.E.2d 556, 559 (Ga. Ct. App. 1981)), quoted in Chrysler Corp. v. Batten, 450 S.E.2d 208, 212 (Ga. 1994). Trespass to personal property requires a showing of willful damage, O.C.G.A. § 51-10-6(a) (2000), which equates to an “ac- tual intention to do harm or inflict injury.” //endon, 417 S.E.2d at 712. A showing of either willfulness or wantonness is sufficient to satisfy the standard for awarding punitive damages. O.C.G.A. § 51-12-5.1(b) (2000). We note also that the property owners must prove their entitlement to punitive damages with clear and con- vineing evidence. O.C.G.A. § 51-12-5.1(b). Continental has waived tts argument on appeal that, under Georgia law, the tort of wanton conduct applies only in conjunc- tion with a risk to “human life.” [Appellant’s Br. 12]. Continental l2a O.C.G.A. § 51-12-5.1(f), (g) (2000). A showing of specific intent to cause harm necessarily would satisfy the other sci- enter requirements; therefore, we begin our analysis with Continental’s argument that Georgia’s statutory cap limiting punitive damages requires us at least to grant a remittitur. Because we conclude from the record that the evidence was sufficient to prove that Continental acted with specific intent to cause harm, it is unnecessary to discuss Continental’s ar- guments concerning the other scienter requirements. Preliminarily, we recognize that an appellant challenging a jury finding regarding an actor’s state of mind faces a for- midable hurdle. We long ago cautioned courts in granting judgment as a matter of law “when resolution of the disposi- tive issue requires a determination of state of mind. Much depends on the credibility of the witnesses testifying as to their own states of mind.” Croley v. Matson Navigation Co., 434 F.2d 73, 77 (Sth Cir. 1970).? Accordingly, we afford great deference to the jury’s relevant conclusions as well as those of the district judge first asked to overturn the jury’s finding. 1. The Meaning of Specific Intent to Cause Harm By statute, Georgia caps punitive damages at $250,000 per plaintiff unless “it is found that the defendant acted, or failed to act, with the specific intent to cause harm.” § 51-12- 5.1(f), (g); see also Bagley v. Shortt, 410 S.E.2d 738, 739 failed to object to the district court’s relevant jury instruction or raise this argument before the district court in its post-cnal motion. See Access Now, Inc. v. Sw. Airlines Co., 385 F.3d 1324, 1331-35 (11th Cir. 2004) (discussing this circuit's frequently applied rule that we will not consider “an issue . . . raised for the first time in an appeal”). * In Bonner v. City of Prichard. 661 F.2d 1206, 1209 (Lith Cir. 1981) (en banc), we adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to close of business on September 30, 1981. ps AY c- . l3a (Ga. 1991) (holding that the cap establishes a limit on the amount that can be awarded “any one plaintiff’). Reading into the term “specific intent” a requirement that the property owners demonstrate that Continental acted for the sole ne- farious purpose of injuring them, both Continental and the L.S. Chamber of Commerce (“Chamber’’), as amicus curiae, contend that the property owners fell short. Continental has waived a key aspect of this argument, however. At trial and without objection, the district court in- structed the jury that “[s]pecific intent to cause harm is where the actor desires to cause the consequences of his act or where the actor believes that the consequences of his act are substantially certain to result from [it].” [Trial Tr. 2,027]. This language reflects, verbatim, the definition adopted by the Georgia Court of Appeals, which equates specific intent in the punitive damages context to intent as defined in the Restatement (Second) of Torts. See J.B. Hunt Transport, Inc. v. Bentley, 427 S.E.2d 499, 504 (Ga. Ct. App. 1992); Viauw v. Fred Dean, Inc., 418 S.E.2d 604, 608 (Ga. Ct. App. 1992); Restatement (Second) of Torts § 8A (1965); see also Council of Superior Court Judges, Georgia Suggested Pattern Jury In- structions, Vol. I: Civil Cases, § 66.711 (4th ed. 2004) (sug- gesting the same definition as that the district court utilized in this case and the Georgia Court of Appeals utilized in Bentlev and Viau). Continental now contends that specific intent requires something more. In essence, Continental and the Chamber contend that the consequences of Continental's actions or in- action must have been not only substantially certain to result but also the end purposely sought. Thus, to avoid the cap, ac- cording to Continental and the Chamber, the property owners must demonstrate that Continental continued to operate tts leaky facility in order to pollute the property owners’ proper- ties rather than, for example, to make or save moncy. At trial, Continental failed to object to the relevant jury instruction and later failed to raise this same argument in tts : . ee ee Wo ee a See ee * ‘ - rey oe es as? oo en ants 1 ae = Se s sig sah oa nt 5 A Sees Oe ee eRe. a OER SP ey TH SNE ee ey bl AS oes a. ae ee) ee Yee Pee Se te oP et ae 4 yan ae ee, 7 ‘ l4a post-trial motion. Indeed, Continental’s brief in support of its post-trial motion unequivocally adopted the district court’s definition after noting Georgia’s reliance on the Restatement. [Br. in Supp. of Defs.’ Post-Trial Mot. at 20]. Not only has Continental failed to acknowledge its lack of objection to the jury instructions, but it has also failed to argue for the appli- cation of one of the exceptions to our rule regarding a party’s waiver of an issue raised for the first time on appeal. See, e.g., Access Now, Inc., 385 F.3d at 1331-35; see also supra note 8. Moreover, in its brief on appeal, Continental neither expressly challenges the district court’s jury instruction nor requests a revicw of the instruction for plain error. See Fed. R. Civ. P. S1(c) & (d). Consequently, Continental has waived this argument.'° We therefore decline to consider whether Continental’s proffered definition of “specific intent,” to the extent it di- verges from the definition provided by the district court, is correct. Instead, we review the evidence in the record to de- termine whether it allows for an inference that Continental at least believed that the contamination was “substantially cer- '° We disagree with Continental's contention that we must enter- tain its argument anyway and find that the cases upon which Con- tinental relies have no bearing in this case. See Boyle v. United Techs. Corp., 487 U.S. 500, 513-14, 108 S. Ct. 2510. 2519-20 (1988) (concluding only that it was not impermissible for the Fourth Circuit Court of Appeals to issue a ruling based on a legal standard different from the standard provided in the district court’s jury instructions); City of St. Louis v. Praprotnik, 485 U.S. 112, 120, 108 S. Ct. 915, 922 (1988) (holding that the defendant's fail- ure to object to a jury instruction would not foreclose review of the relevant legal issue raised on appeal when the defendant’s “legal position in the District Court . . . was consistent with the legal standard it” advocated on appeal, and the Court of Appeals had “very clearly considered, and decided,” the issue on appeal). ‘if 15a tain” to result from its actions or inaction. We conclude that the evidence was sufficient to support such a finding." 2. Sufficiency of the Evidence The evidence at trial demonstrated that by the late 1990s, if not sooner, Continental was aware that Unit | had fallen into a state of disrepair, a condition Nicks, the Phenix City plant manager from 1999 to 2004, agreed was “deplorable.” (Trial Tr. at 389]. In 1998, Ken Wilder, at the time the Phenix City plant manager, along with Todd Miller, then CCC’s Corporate Director of Safety, Health, and Environ- mental Affairs, attended a citizens meeting at the Columbus City Manager’s office. [Pls.’ Ex. 2]. According to Wilder’s notes, which he submitted in a memorandum to Nicks, the purpose of the meeting was to discuss complaints of pollu- tion that the citizens apparently believed was carbon black. The citizens provided detailed descriptions of the fallout on their property, and Ditchfield discussed problems he had been having since 1982. Notably, Wilder’s memorandum ac- knowledged that “{iJn 1982 the plant had a problem resulting in carbon black on residents[’ homes] in the Oakland Park area. Continental Carbon paid to have the homes of residents cleaned.” [Pls.” Ex. 2-1]. Nevertheless, pointing to chemical analyses conducted by McCrone Associates, Inc., and reter- ring to the “elemental composition” of the samples tested, Wilder assured the attendees that the pollution was not car- bon black despite knowing that at least one of McCrone’s previous analyses suggested that it was.'* '' Continental similarly waived its current arguments that it lacked notice of the possibility that the district court would interpret the specific intent requirement as it did and that the Rule of Lenity compels an alternate interpretation. Approximately one year before the mecting with the Columbus citizens, CCC had submitted a sample of dark material from Ac- tion Marine to McCrone for an analysis. McCrone shared the re sults with Gary Shafer, then the Phenix City plant’s Director of l6a Apparently dissatisfied with Continental’s explanation, the complaints continued, and Nicks, after becoming plant manager, grew increasingly disgusted with the condition of the facility. Around that same time, two separate teams of CCC employees, one of which included Nicks, evaluated Unit | and recommended destructing and rebuilding the sys- tem almost entirely. CSRC then sent a team of its own, which arrived at a different conclusion and recommended not re- building Unit 1.'° Continental scrapped the project and did not resume meaningful efforts to resuscitate the rebuilding plan until 2004. Even then, internal company E-mails re- Safety, Health, and Environmental Affairs. According to McCrone’s report, the carbon black reference sample provided by CCC contained primarily carbon and a trace of sulfur. The Action Marine sample contained, inter alia, carbon and sulfur, which McCrone somewhat dismissively concluded “may indicate a trace of your carbon black.” [Pls.’ Ex. 80-1]. At trial, Nicks testified regarding this analysis and described McCrone as an “independent laboratory.” [Trial Tr. at 287]. The jury was free to conclude otherwise. In a facsimile transmission to Tharpe informing him of the test results, McCrone described the elemental composition of the sample, including the existence of carbon and sulfur. Despite having already conveyed to CCC the possibility that the sample contained carbon black, McCrone’s note to Tharpe concluded, “Therefore, although the black particu- late on the wipe looks like the carbon black both visually and with the microscope, the elemental data show the two to be different.” [Pls.” Ex. 80-2] (emphasis added). At trial, Nicks acknowledged that the information provided by McCrone to Tharpe was inconsis- tent with the information McCrone provided to CCC and agreed that one possible explanation was that McCrone had lied for CCC. [Trial Tr. at 292}. '* Continental anticipated that rebuilding Unit 1 would cost in ex- cess of $4 million. All expenditures exceeding $200,000 required the approval of CSRC president Peter Wu, Ph.D., who also served as CCC’s chief executive officer and vice-chairman of its board. 17a vealed, Continental planned to extend completion of the pro- ject to at least 2006. In 1999, Continental constructed Unit 2 and installed the thermal oxidizer. When developing plans for Unit 2, Conti- nental made an economic decision to limit the number of bagfilter compartments, thereby rendering Unit 2 incapable of sustaining the flow of air needed to maintain acceptable production levels. Rather than reduce production, however, Continental overloaded Unit 2, and the bagfilters, which the manufacturcr designed to last one year, began splitting and leaking in half that time. Indeed, some evidence suggested that the bagfilters failed after only three or four months. Emissions and complaints continued despite the opera- tion of the thermal oxidizer, the supposed catchall. In April 2001, in response to complaints from Tharpe, an investigator with the U.S. Environmental Protection Agency sat across the river from the Phenix City plant and documented a car- bon black emission from two exhaust stacks that CCC had not even received a permit to operate. Nicks later became aware that samples taken from Action Marine following the emission tested positive for carbon black. Approximately six months later, with no steps having been taken to correct the problems with Unit 2, Nicks sent an e-mail, copied to Juan D. Rodriguez, at the time CCC’s senior vice-president of op- erations, describing Unit 2 as “constantly operating with some small] leak up to a[{n] intolerable leak.” [Pls.’ Ex. 5]. Nevertheless, Continental did not finally approve the addition of two bagfilter compartments until July 2002, approximately ten months later. Continental’s attitude regarding carbon black emissions was further evidenced by its failure to attempt to accurately monitor the carbon black being released into the environ- ment. Nicks testified that he had no means of determining how much carbon black his facility released into the air. Ac- cording to Nicks, the plant relied solely on cmployces’ visual observation to determine whether any black smoke drifted 18a from the facility. Nobody was assigned to monitor the emis- sions on a full-time basis, however, and testimony confirmed that visually monitoring black emissions at night from the plant was virtually impossible. The plant did utilize an alarm system designed to detect solid and liquid particles in the exhaust plumes; however, ac- cording to Randy Wangle, a former maintenance superinten- dent at the Phenix City plant, Continental had a policy of simply cleaning and resetting the alarm without addressing leaks unless the alarm sounded several times within an hour. We have closcly reviewed the massive record in this case, and, as the foregoing discussion demonstrates, we con- clude that the evidence, which was clear and convincing, was more than sufficient to demonstrate that Continental operated the Phenix City plant and failed to correct the problems plaguing it with the “specific intent to cause harm” to the property owners, as that term is defined by the jury instruc- tions which govern this case.'* C. Compensatory Damages 1. The Proper Measure of Action Marine's Damages The purpose of compensatory damages is “to place an injured party in the same position as it would have been in had there been no injury . . ., that is, to compensate for the in- jury actually sustained.” //ome Ins. Co. v. N. River Ins. Co., '* The cases upon which Continental primarily relies do not com- pel a different outcome. See Wal-Mart Stores, Inc. v. Johnson, 547 S.E.2d 320, 322-25 (Ga. Ct. App. 2001) (concluding that the cvi- dence was sufficient to find that the defendant, Wal-Mart, acted with specific intent to harm the plaintiff despite evidence that would allow a fact finder to conclude that the plaintiff was the vic- tim of poor communication and confusing circumstances); Bentley, 427 S.E.2d at 505 (finding that the cap applied in a case involving injuries caused by an exhausted truck driver); Viau, 418 S.E.2d at 608 (finding that the cap applied in a case involving injurics caused by an intoxicated driver). Bay $ 19a 385 S.E.2d 736, 742 (Ga. Ct. App. 1989). Continental con- tends that the damages awarded to Action Marine improperly include a windfall of approximately $800,000 in debt in- curred in the ordinary course of business. This argument does not take into account the evidence that Continental’s actions led to Action Marine’s demise and thus its inability to gener- ate revenue and repay its debts.'> Although the parties fail to cite relevant Georgia law, the Georgia Supreme Court re- jected an argument similar to Continental’s in circumstances sufficiently similar to the instant case for this court to do the same. See Bennett v. Smith, 267 S.E.2d 19, 19-20 (Ga. 1980).'° Without objection from Continental, at trial Action Ma- rine presented as an expert Edward Sauls, who was at the time a certified public accountant, certified valuation analyst with an accreditation in business valuation, and a certified fi- nancial forensic analyst. In great detail, Sauls explained to the jury the basis for his conclusion that an award of $1.2 million was necessary to “place [Action Marine and its owner, Tharpe] in the positien financially that they otherwise 'S Continental does not challenge the sufficiency of the evidence linking its carbon black to Action Marine’s closing beyond what has already been discussed. Therefore, we assume without decid- ing that Action Marine proved that the discoloration of its boats proximately caused its insolvency. ‘* Not entirely analogous, Benne?t is nonetheless instructive. The plainuffs in Bennett operated an egg farm and contended that the defendants had sold them contaminated feed. which “caused the plaintiffs’ hens to stop laying eggs.” /d. at 19. After distinguishing the case from more typical breach of contract cases involving in- complete transactions, the Georgia Supreme Court concluded that the plaintiffs could recover “lost revenues as damages without de- ducting production expenses therefrom, since the plaintiffs’ evi- dence showed that they incurred the same expenses they would have incurred had the hens continued to lay eggs.” /d. at 20 (em- phasis added). 20a would have been had it not been for the actions of the Defen- dant.” [Trial Tr. at 1097]. In other words, he testified as to “what .. . Action Marine [would] be worth today had they not lost. . . profits.” [Trial Tr. at 1110). He further explained the three common “approaches to valuation” and led the jury through his application of the “‘as- set-based” approach. Essentially, based on what Sauls con- cluded Action Marine would be worth but for Continental’s conduct, he determined that a purchaser as of the trial date would assume Action Marine’s liabilities of $795,243 and pay an additional $653,166 for a total of $1,448,409. He fur- ther reduced the total to account for variables that are not im- portant here and concluded that $1.2 million would be neces- sary to compensate Action Marine for the pollution damage. [Trial Tr. at 1117-18]. On cross-examination, Continental did not challenge Sauls’s valuations and focused solely on the basis for his conclusion that Action Marine’s losses were attributable to the carbon black contamination. Moreover, Continental nei- ther offered an alternative methodology nor presented an ex- pert of its own to provide a different quantum of damages. Continental now contends that Sauls’s application of the as- sct-based approach was incorrect. We disagree. See Dunn v. Comm'r of Internal Revenue, 301 F.3d 339, 352-53 (Sth Cir. 2002) (approaching asset-based valuation from the perspec- tive of a “willing buyer”); Okerlund v. United States, 53 Fed. Cl. 341, 347 n.4 (Fed. Cl. 2002) (“Under the asset based ap- proach, the value of a business is equal to the cost that would be incurred in acquiring a group of assets of similar utility”). Even if Sauls was mistaken in his calculations, Continental had every opportunity to highlight his error for the jury. We conclude that the district court did not err in denying Continental’s motion for remittitur or a new trial on damages. Action Marine’s proffered measure of damages did not impermissibly include damages not attnbutable to Continen- 2la tal’s carbon black, and the expert testimony was sufficient to support the compensatory damages awarded. 2. Tharpe’'s Ability to Recover Damages Continental contends that Tharpe may not recover dam- ages because his injuries, as sole shareholder of Action Ma- rine, are derivative of his company’s injuries. Again, we dis- agree. In Georgia, a sole shareholder’s status as personal guarantor of his corporation’s debt gives rise to an independ- ent, legally compensable injury when tortious acts directed at the corporation injure the shareholder in that capacity. Wi/- liam Goldberg & Co., Inc. v. Cohen, 466 S.E.2d 872, 881-82 (Ga. Ct. App. 1995). Continental offers no reason to believe that a similar rationale would not apply with respect to the independent injuries inflicted upon Tharpe’s business reputa- tion, which was so intertwined with that of his corporation as to be virtually inseparable. See O.C.G.A. § 41-1-1 (1997) (“A nuisance is anything that causes hurt, inconvenience, or dam- age to another .. . .”); Anderson v. Fussell, 44 S.E.2d 694, 696 (Ga. Ct. App. 1947) (“The body, reputation, and property of the citizens are not to be invaded without responsibility in damages to the sufferer.”); cf’ Curl v. First Fed. Sav. & Loan Ass'n of Gainesville, 257 S.F.2d 264, 265-66 (Ga. 1979) (up- holding a jury verdict in favor of a plaintiff in a wrongful foreclosure suit seeking damages for. inter alia, injury to her reputation in the community). Therefore, we conclude that the district court did not err in allowing Tharpe’s claims to go to the jury. D. Constitutionality of the Punitive Damages Award “Punitive damages may properly be imposed to further a State’s legitimate interests in punishing unlawful conduct and deterring its repetition.” B.M.W. of N. Am., Inc. v. Gore, 517 U.S. 559, 568, 116 S. Ct. 1589, 1595 (1996).'” “It should be '’ Georgia law allows punitive damage awards in cases involving “aggravating circumstances in order to penalize. punish, or deter a defendant.” O.C.G.A. § 51-12-5.1(a) (2000). 22a presumed a plaintiff has been made whole for his injuries by compensatory damages, so punitive damages should only be awarded if the defendant’s culpability, after having paid compensatory damages, is so reprehensible as to warrant the imposition of further sanctions to achieve punishment or de- terrence.” State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 419, 123 S. Ct. 1513, 1521 (2003). The United States “Constitution imposes a substantive limit on the size of punitive damages awards[,]” however. Honda Motor Co., Ltd. v. Oberg, 512 U.S. 415, 420, 114 S. Ct. 2331, 2335 (1994). “A decision to punish a tortfeasor by means of an exaction of exemplary damages is an exercise of state power that must comply with the Due Process Clause of the Fourteenth Amendment.” /d. at 434-35, 114 S. Ct. at 2342. We are therefore charged with reviewing the jury’s award to determine whether it “can fairly be categorized as ‘grossly excessive’ in relation to” the state’s legitimate inter- ests, Gore, 517 U.S. at 568, 116 S. Ct. at 1595, and to “en- sure that the measure of punishment is both reasonable and proportionate to the amount of harm to the plaintiff and to the gencral damages recovered.” Campbell, 538 U.S. at 426, 123 S. Ct. at 1524. When determining whether a punitive damages award is unconstitutionally excessive, we are guided by “(1) the de- gree of reprehensibility of the defendant's misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and punitive damages award; and (3) the differ- ence between the punitive damages awarded by the jury and the civil penalties authorized or imposed in comparab [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386009_1376%3A1. Public record. Not legal advice.